It is essential that you can accurately forecast income and
expenditure for your business. Initially, most of the financial
information in your business plan will be based on assumptions of
potential sales that have been determined by your research.
As
time goes on, you’ll get much more confident with forecasting and your
assumptions will be more accurate. Cashflow is at the heart of
business survival, therefore knowing, or expecting, where it is coming
from is important. If your records are accurate and up to date,
referring to the business's cash receipts and payments books will give
you the figures to quickly calculate the expected amount of money
coming in and going out of the business. You can estimate sales by
using past figures and allow for periodic payments such as rent,
telephone, electricity registrations, etc, which means you should be
able to come up with an estimate of cashflow for the period ahead.
Cashflow forecasting
A
cashflow forecast is one of the tools used by businesses to plan
cashflows. A planned cashflow means that temporary cash shortages can
be remedied in advance by agreeing to an overdraft facility with the
bank. Banks are more likely to agree to this if they can be shown a
cashflow forecast to demonstrate when and how the overdraft will be
repaid.
A Cashflow forecast template can be found in the Useful Documents section