Profits Cash and Business Plans

Business plans or proposals need profit and cash flow forecasts. However impressive an executive summary or mission statement profit and cash come first.

Planning Financial Support

The purpose of presenting a business plan or proposal to a bank or investor is to inspire confidence. To do that it must address the question of risk.

That takes a lot more than an executive summary or mission statement. No matter how plausible your arguments, they will mean nothing to a bank or investor unless the plan or proposal is backed up with well executed and accurate profit and loss and cash flow forecasts.

The Profit and Loss Forecast

Profitable trading is necessary if the business is to generate cash but profits by themselves do not guarantee liquidity or even solvency.

That ultimately depends on planning how cash is to be used for investment and by the efficiency with which working capital is managed; especially accounts receivable and stock / inventory. If investment is excessive, working capital will suffer and if that happens for long enough, the business will eventually run out of cash, regardless of profits.

The Budgeted Cash Flow Forecast

Cash measures risk so for any business plan a budgeted cash flow forecast is essential.

This is a forecast of monthly income and expenditure. The crucial figure is net cash flow plus available cash from external financial facilities. If that forecasts a deficit for any month, new cash or loans must be injected to ensure that the bills continue to be paid on time.

Working Capital

This is the most important figure in the balance sheet for lenders, creditors or investors. Working capital is calculated as current assets less current liabilities.

Current assets such as accounts receivable and stock / inventory add to working capital while current liabilities; representing debts to be settled with twelve months consume it. Working capital describes whether or not the business is capable of meeting its future financial obligations.

A business plan forecasting negative working capital will call for an injection of new money.

The Operating Cash Flow Forecast

This forecasts how cash will be generated and spent in the year ahead through the trading activity of the business and nothing else.

For any business plan that is seeking financial support, operating cash flow forecasting is very important. This is because it measures the ability of the business to both service and repay such financial support within the agreed term.

Net Cash Flow and Financial Forecasts

The net cash flow forecast adds revenues and expenditure from non-operating transactions such as interest, tax and investment activity to operating cash flow.

The change in net cash flow is then balanced against the forecast change in external financing from the bank and other loan providers. This defines how your business plans to finance its activities and investments for the coming year and where the cash for that will be coming from.

All of these forecasts are produced by Figurewizard as well as forecasts for balance sheets, business ratios, break even profitability charts and analysis of overheads, assets and liabilities. All that is needed are your estimates for sales, margins, overheads and investment.

Factoring and Cash Flow Planning

Interactive cash flow charts are also produced to enable planning where factoring or invoice discounting is used or under consideration. These complete the full set of profit and loss, cash flow, performance and liquidity forecasts. Together those forecasts will give your business plan real impact and plausibility.

You are welcome to edit our sample forecasts (they are working examples) to see how Figurewizard can work for your business.

Saving and Exporting Forecasts to Excel

Subscribing allows you to save up to a hundred full sets of forecasts with full functionality. Forecasts can cover one, two or three years. All saved forecasts can be exported to excel for formatting and / or printing.

Subscription costs UK£30 a year (approximately US$32 or 25 Euros).

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