Cash Flow Projection free copy included
Cash Flow Projection free copy included

Cash Flow Projection free copy included

Cash Flow Projection As Life-Saver Of Each Business

Henry Sheykin
May 4, 2018 · 7 min read

It’s hard to believe, but even business with intensive growth and solid returns may encounter the risk of owning more than they can actually pay. If your business is stuck in a rut and you don’t know how to solve the situation, you should manage your cash flow.

Cash flow projection is a great way to identify the potential shortfalls in advance, excluding the perils of taking a bath.

By dedicating just 35–45 minutes a week on working on your cash flow forecast free copy, your efforts to succeed in business will pay off. Before we cut to the chase, let’s focus on the main features of cash flow projections, laying emphasis on how this prediction method can help your funds survive.

In fact, cash flow is the life-blood of all successfully operating businesses, so let’s find out why.


The Main Perks Of Financial Projections

Briefly speaking, thanks to cash forecasting, you can estimate the funds, flowing in and out of your business operations. Deep inside each plan, there are two key components — receivables and payables; all the calculations are based on them.

Usually, financial projection covers a short-term period of forecasting, from a week to a year in particular. Each cash forecasting is based on realistic, not optimistic, assumptions about how funds may move within your business.

Hence, thanks to the use of financial projection, you receive a big picture of how your business may evolve and develop within a relatively short period. Key financial assumptions, based on receivables and payables, allow the projection to be pretty dynamic and specific.


How Does Cash Flow Planning Work?

How to estimate cash flow budget for your business? First of all, you have to decide, which type of planning do you need. In other words, you need to find out, whether it should be a long-term or short-term projection.

How to estimate the length of planning? Well, it’s not that difficult as well!

The duration of budget planning strongly depends on the accounts payable payment period.

Consider the maximal time you can use to pay back — this will be the maximal span of your cash flow planning. Remember that it’s always better to break up the budget into smaller periods so that your cash flow projection can be more accurate and specific. Keep it always in mind to use your cash flow planning most efficiently.

Now let’s switch to the example to make sure you understand the overall idea properly.

Imagine that you’ve just bought new equipment for the company and have a period with a running time of 1 month to take up loan payments. In such a case, your cash flow plan should estimate the funds at least for 1 month in advance, as this is the maximal duration of your payback period.

At the same time, 1 month is the minimal required planning horizon. Hereby, the period with 8–10-week duration is optimal for managing your cash flow quickly and effectively.

Using this strategy, you’ll see how the funds move within your business and whether they meet your financial goals. If something goes wrong throughout the entire 1-month projection period — cash flow statement will immediately reflect it, and you’ll see the reason you can or can’t pay back a debt.


Let’s Evaluate Cash Flow Statement Example

To gain a deeper insight into the building blocks of financial projection, let’s take a look at cash flow template in excel.

Before you start working, you should customize the customer report from your QuickBooks data.

If you don’t use QuickBooks accounting software — the suggested template can also integrate with Xero.

To start working, download accounts receivable report from the accounting system and paste it into AR_Input tab.

The most important columns are “Terms”, “Due Date”, “Paid” , “Open Balance”. These columns should match with the AR_Input tab.

After that, you’ll need to switch to Schedule tab, where you can adjust the time of receiving money from the clients.

The gimmick of this schedule is that it’s maximally close to the truth: though all the clients have to pay on time, they hardly ever do it.

Due to this, you’ll be able to include adjustment expectations into the Schedule, and the projection will take this information into account, providing you with maximally accurate revenue collection dates and financial predictions.

Along with receivables, cash flow projection can calculate your payables.

All you need for including them into the database is just to copy your Accounts Payable Statement from QuickBooks or Xero and paste it into cash flow projection template.

The Reasons To Use Cash Flow Projection

Now let’s summarize the main reasons for using cash flow forecasting.

First and foremost, the data put into model isn’t set in stone — it can be manually edited and changed literally on the fly. It’s good both for big businesses with stable revenue and quickly evolving little startups, whose incomes are pretty irregular yet.

All the estimates change automatically as soon as you edit the initial numbers. It means, the entire process is hundred-percent automatic. Thus, you don’t need to devote extra time to recalculating the receivables and payables, as the model will step into the breach, providing you with new numbers on the jump. Just change the initial data on the dashboard and watch how cash flow forecast reflects the updated information on the spot.

Breaking up the calculations into weekly periods, you receive very dynamic and accurate predictions. It follows that all financial forecasts are responsive even to minimal changes, which might be the reason for huge financial problems if are ignored. As you don’t want to go all to rack and ruin, short-term cash flow planning, narrowed down to weekly periods, is exactly what you need.

All these features in combination provide you with the maximally accurate overview of your business.

Keeping track of the way money flow in and out of your business, you’ll see the main sources of economic problems your company faces.

Lastly, you’ll need less than an hour per week for analyzing the cash flow outputs and updating the data in your cash flow inputs.

Thus, cash flow modeling is a time-efficient, budget-friendly, and functional way to keep your finger on the pulse of your business.


Let’s Balance The Sheet

Nowadays, most businesses fail because their owners don’t understand the reasons their incomes melt away. Sure, they know where all the funds come from and what kind of problem they face when something goes not as planned, but they don’t see the numbers! That’s why cash flow statement helps those businesses to see the ins-and-outs of their functioning, the reasons for mistakes, and the opportunities for growth.

Try using the suggested cash flow statement template, and you’ll seize the very essence of your business. Open the template as soon as you finish reading this article and watch how your incomes start growing immediately!

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Henry Sheykin

Written by

Expert of Business Analytics & Financial Modeling in SAAS|ECOM|FMCG — finmodelslab.com

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