Building a Cash Flow Forecast

HOW TO DO A CASHFLOW
(Or how long can my money last!)

A cash flow is simply a list of what is coming into the bank and what is going out.   Now more than ever we need to be watching every penny. In times of uncertainty, you need to know your options and you can not do this if you do not know where the money is, where more is coming from and where you will have to spend it.

There are a number of software packages out there that you can use, but an excel spreadsheet or Google sheets are just as good as anything else. It also allows you to change the figures to play out different scenarios.

Step one

Find out what is in the bank now.

This should be easy if you have online banking. If not get a statement from your bank.

Adjust this figure for any recent payments or receipts that are not on the bank statement. Again this is easy for you if you bank online.

Step two

List all your outgoings:

The frequency – daily, weekly, monthly, quarterly and annually;

When you expect to pay

The amount;

Who you are paying;

Is the payment direct debit or standing order or do you make the payment;

The degree of flexibility you have in paying this organisation or person;

Step three

List all your incoming funds:

The frequency – daily, weekly, monthly, quarterly and annually;

When you expect to receive the money

The amount;

Who is paying you;

Is the payment direct debit or standing order or are you reliant on them making the payment?

The likelihood of this person or organisation cancelling the payment.

When you are sure that you have all your costs and revenues for the next 4 months at least, group them into the weeks you are expecting to see them. Don’t fret about this stage, do your best – you don’t have a crystal ball and we can adjust these figures as we go along.

We then work through the weeks one at a time starting with what is in the bank today, less the expenses of this week, plus the revenues of this week. This simple sum then gives us the balance in the bank at the end of the week.

A simple example is below showing that on reduced revenue £3000 can last almost 10 weeks.

We can play around with this basic model, changing the amount of revenue, and payments, the one thing we cannot change is the amount in the bank we start with.

Knowing what you expect the flow of money to be every week, will make you feel more in control even if the news is dire.   Once you have the information, you can make a plan.

If you are facing the prospect of no new money coming into the business, add up your expenses and by dividing the money you have by the amount you have to spend every month, you will know how long the money will last. Then work out what grants and help you can get from the government and add that to your calculations.

Be prepared, know your numbers, know your business.   Plan for the worse, work for the best.

If you would like further support with your financial business planning, email angelaturton@actioncoach.com