Cash Flow Sheffield

Monthly forecasts of cash flow are fundamental to your business. Depending on your type of business, you are unlikely to be able to raise investment or develop a good relationship with your bank without an accurate assessment.

It is generally recommended that all new businesses should prepare a monthly cash flow forecast for the first year and an annual forecast for the first five years of business operations.

There are other benefits of forecasting your monthly cash flow:

• An accurate monthly cash flow forecast will allow you to get a clear idea of how your business is doing - and how it is likely to perform in the future
• You will be able to specify times when your business may need additional funding, such as when cash outflow exceeds inflow
• Inconsistencies in performance can be identified, predicted and remedied
• Major new investments can be bedded in and accurately assessed

Construct a cash flow statement

ADD: Cash in

• Sales made, for which you're awaiting payment - include the VAT amount
• Other incoming amounts (eg rent payments etc)
• Forecast the sales you will make in future months. Note the cash amount you expect to receive.

LESS: Cash out

Calculate the cashflow

Accountancy software

Using software will take much of the tedium out of forecasting, but it doesn't relieve you of the need to gather information. All computer packages depend on the quality of information inputted, so false assumptions and wrong figures have got to be guarded against. These errors can be easy to make - and difficult to identify.

Also, remember that whether you are using a computer or performing the assessment manually you are considering cash transactions only - you are not looking at promissory notes, invoices despatched and received etc.