A cash flow forecast should be a reflection of actual money into and out of a business.
It isn’t supposed to be a substitute for a profit and loss account.
Is your income to be received regularly?
Account should be taken of seasonal peaks and troughs in your cash flow.
Is your income affected by the weather, holiday periods, school holidays, etc?
If your company expects its income from a small number of large payments – say from
regular contracts – the cash flow should show when these amounts are expected to be
Do not ‘smooth out’ the income by dividing the amount out over the year.
Staff costs should include on-costs – NI, tax, etc. (As a rule of thumb, allow an extra
20% on top of salary).
In kind or pro-bono items should not be included. Nor should debtors/creditors.
Include VAT with purchases.
Extra notes should be appended to explain certain items, e.g.
professional fees, loan instalments (it is not always clear
which loan is referred to – an existing one or the one
being applied for.), bank charges or interest, drawings,
fees or any item out of the ordinary. (e.g. an unusually
high or low figure in any given month.
There should be no gaps.
If you are sending us actual cash flows up
to the present time there should not be a
gap before commencement of cash flows
forecast for the future.
Forecast cash flows should
correspond with cash items on a profit
and loss forecast.
If your cash flow shows deficits, i.e. minus
figures at the end of the month, how are
these to be financed? (e.g. bank overdraft.)