Preparing a Cash Flow Projection A cash flow projection is an important business planning tool used by businesses to estimate income (cash receipts) and expenses (cash paid out) over time on a monthly basis. Simply put a cash flow projection will tell you if you will have enough cash to continue running your business. In addition it can provide insights on what steps you may need to take now or in the future to improve the profitability and stability of your business. See this example template for completing cash flows, 12 Month Cash Flow Statement . For your business to benefit from cash flow projections, estimates of future income and expenses have to be realistic and as accurate as possible. Overly optimistic projections of future income or inaccurate or incomplete budgeting of expenses could threaten the success of your business or hide potential opportunities to boost the profitability of your business. Cash flow projections are also helpful when applying for loans to expand your business. Lenders will want to see cash flow projections to see if your business is profitable and its finances are well managed. If your business is a start-up be conservative about how long it will take your business to reach full capacity. Monthly Income Review your expected income in your annual budget and figure out when you expect to receive that income for each month. It is important to break down income by when you expect to receive the income not when you earn the income. This ensures the timing of income lines up with the timing of expenses so your business has the cash on hand to pay those expenses.
43
Made with FlippingBook - Online Brochure Maker