Cashflow Management


Refinements to a simple cashflow forecast

There is no single best way to set out a cashflow forecast. Some refinements to the most basic ways of setting out the information will give you a more sophisticated view of your business’ situation.

You could, for example, separate cashflow for business operations from funding cashflow. This gives a clearer picture of the actual performance of your business and is a format that many accountants prefer.

Cashflow from operations includes the following items:

Inflows such as:

  • cash sales
  • receipts from credit sales in earlier periods
  • interest on savings

Outflows such as:

  • payments to suppliers
  • hire purchase and lease payments
  • expenses – rent, rates, insurance, utilities, telephone, etc
  • wages
  • taxes and National Insurance
  • interest on loans and bank charges

Funding cashflows include:

Inflows such as:

  • loans from banks
  • increase in share capital

Outflows such as:

  • dividends paid
  • loans repaid

With these two types of cashflow separated you can gauge how self-sufficient the day-to-day working of your business is. A net outflow in operational cashflow is usually an indicator of problems that need to be addressed quickly.

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