Cash Flow Forecast

Business Plan Cash Flow Forecast

What is a Cash Flow Forecast? (Cash Flow Statement)

A cash flow forecast shows you when your business will run out of cash. A business needs cash the way that people need water. You can survive for a short time, but it keeps getting harder and harder. Soon after you run out, the organism simply stops.

That is the main reason that you prepare a cash flow forecast for your business plan before you start your business. It will tell you how much money (cash) you are going to need and when you are going to need it.

How Much Cash Will You Need

You need to work out how much cash you need to start the business. How much do you have to spend on premises, prepayments on the lease, improvements to the property, equipment, insurance, training, inventory, legal and professional fees, marketing materials, website, advertising, interest on borrowed money, etc.

This is before you even open the business. Then you might have to allow for employee wages, rent, phone, utilities, bank charges, credit card fees, auto expenses, etc. You may also have to pay for more inventory before your customers have paid you for their initial purchases. You might also need some money for yourself and your family to live on, until the business revenues earn you enough cash to pay all of the expenses including your own salary.

Poor cash flow is one of the primary reasons for business failure. You can have excellent sales, and still run out of money. Most companies will take between 30 and 90 days to pay you, and unfortunately the larger the company, the longer they seem to take. How good are your credit and collection policies? There’s a basic business saying:

“A sale is not a sale until the money is in the bank.”

For any business, and especially for start-ups, cash is king. Cash is the lifeblood of your business. Everybody wants to be paid. You need a reliable cash flow forecast in your business plan to make sure that you don’t run out of money. Cash flow is not the same as profit. Profitable companies can be forced out of business through poor cash flow, often caused by poor cash management.

Good planning and a properly prepared cash flow forecast will show you (and your banker and investors) that your business will earn enough cash to pay your bills, your loans, and yourself.

We are business plan consultants and professional accountants, so we can prepare excellent business plans with realistic and professional financial forecasts. We know what lenders are looking for and our financial statements are prepared to professional accounting standards.

We are based in Vancouver and have worked for companies in the U.K., the Netherlands, and across Canada. We have clients throughout Metro Vancouver, from Abbotsford to the Sunshine Coast, through Langley, Surrey and Delta to Richmond, Burnaby and Coquitlam. We also work with many people in the GTA and Golden Horseshoe from Kitchener to Kawartha Lakes, Cobourg to Chatham-Kent.

You can have our professionals work with you. Call us toll-free at +1 (800) 661-9842, get expert help with your business plan, and get your financing approved.