Cash Flow
Question: Why do I need a cash flow ?
Answer: In order to manage and control operating business activities!
A cash flow is a tool that can be very helpful in day to day control of money received and money paid out.
There are different types of cash flows and can also be classified as cash flow forecast or cash flow statement.
A cash flow is forecasting movement of cash and expected balance in the bank at any given time.
Current Cash flow week by week for the next month ahead
Annual Cash flow usually for the next 12 months (month by month)
Rolling Cash flow calculates changes in the forecast for the next 12 months
Depending on the information level that you require you can produce cash flow by:-
Weekly
Monthly
Quarterly
Bi annual
Annually
For new business it is advised to include a cash flow for 12 months with your business plan, usually requested if you are looking to raise funds for the business.
For existing business it is a useful tool to assist the day to day control of finance and may be requested by the bank
The cash flow will assist in a number of ways
When do I expect my customers to pay (Debtor Control)?
When do I pay my suppliers (Creditor control) ?
When are my direct debits to be paid?
When do I pay loans?
Which cheques have not been cashed yet?
How much available funds do I have?
How do I put a cash flow together? do I need software ? What happens if the cash flow changes?
All depending on the level of information you need to operate your day to day business!
You could use an excel template, or you could purchase software already to go.
But consider firstly the cost and time you need to operate, set up and input information.
The cash flow although predicted (estimated) obviously will change from week to week, therefore you need to be able to input the amendments and the spreadsheet or software will automatically update the information going forward.
The cash flow will need to be set up in order to show the variance – why did the figures change for example
Did a customer not pay? Was a supplier not paid? etc.
Who ever manages your cash flow will be able to report this information too you in order for you to review.
Which ever method you prefer we can assist you in setting up your cash flow, offer training or we can process the cash flow for you if this is more cost efficient for you.