Whats the point Why you need them Its essential for businesses to know when income will be received and when bills will be paid This ensures sufficient cash is available It helps review actual figures against the budget ID: 355584
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Cash Flow Forecasts
What’s the point?Slide2
Why you need them
It’s essential for businesses to know when income will be received and when bills will be paid.
This ensures sufficient cash is available
It helps review actual figures against the budget
Corrective action can be taken early
Today’s decisions affect future cash flow
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They help when:
Sales are lower than planned
Debtors pay later than anticipated
Bad debts are higher than forecast
Interest rates rise
Costs increase
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Difference between profit and cash
Profit = difference between the total amount your business earns and all of its costs.
You may be able to forecast a good profit for the year yet still face times when you are strapped for cash.
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Inflows
Payment for goods/services from your customers
Receipt of a loan
Interest on savings and investments
Increased bank overdrafts/loans
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Outflows
Purchases of stock or tools
Wages, rent and daily operating expenses
Purchase of fixed assets (machinery, PC’s, office furniture etc.)
Loan repayments
Income tax, VAT and other taxes
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Improve cash flow by:
Asking customers to pay sooner
Chase debts promptly
Ask for extended credit terms
Order less stock but more often
Lease rather than buy (premises, tools)
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Sales planning
How many new customers do you gain each year?
How many customers do you lose each year?
What is the average level of sales you make to each customer?
Are there particular months where you acquire or lose more customers than usual?
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New
businesses have to make assumptions based on market research and good judgement.Slide10
Sales assumptions
Every year is different
You need to list any changing circumstances that could significantly affect your sales.
These factors - known as the sales forecast
assumptions
- form the basis of your forecast.
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Your
resourcesSlide12
The marketSlide13
Your
productSlide14
Your
sales assumptionsSlide15
Frequent Forecasting Mistakes
Wishful thinking
Ignoring your own assumptions
Moving goal posts
No consultation
No feedback
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Projected Profit / Loss Scenario
Pounds (£k’s)Slide17
Useful resources:Tool: COBRA: accessed for free from Rise Up team in The Careers Service (market research tool)Book: The Entrepreneurs Book of Checklists by Robert Ashton
www.startups.co.uk
www.businesslink.gov.uk