Cashflow Projections
By Oladotun Ogunsulire


When you're starting a new business or taking you business in a new direction, its always a good idea to prepare a cashflow projection for your new endeavor. Preparing a cashflow projection is a good way of preparing your businesses for the things that might come its way in the future. If done properly, you can actually reduce the number of unforeseen monetary events that happen within your planning horizon. Here we take a look at some of the factors that you should consider in building your cashflow projection.
Reference:: Sikh Philosophy Network http://www.sikhphilosophy.net/business-and-lifestyle/22309-business-small-business.html
Reference:: Sikh Philosophy Network http://www.sikhphilosophy.net/showthread.php?t=22309
For a new business seeking finance from investors , financial institutions or the government, an accurate cashflow will certainly be a crucial component of the business plans required by these organisations. Its therefore important that before you start drafting a cash flow projection, you should do some research on the costs and income you're likely to be dealing with. To research your likely costs, you might consider simulating the running your business based on your knowledge of that business which might come from having worked for another business in the same industry. This simulated trial run could be replaced with an actual, limited scope trial run, that is actually operating the business for a short period to see how things actually work. Beware though, there might be regulatory reasons for not actually running the business till you have everything in place, including finance and a cashflow projection. Regulatory restrictions include licensing, tax reporting, association membership, government
After doing your research , you would then need to either hire a professional to prepare the computations based on sound accounting principles or prepare the projections yourself if you believe you have the required knowledge.
Ideally, a cash flow projection will be a full, monetary model of your business. To this end three elements it must have are the projections for cashbook, profit and loss account and Balance sheet.
If you are not familiar with these terms, then it would be best for you to get your cash flow projection prepared by a professional. Where your cashflow projection is being prepared by professional advisers, they will require your researched estimates.
Cashbook projection
This is usually a recording of expected incoming and out going cash. The cashbook projection will usually be based on daily or monthly expected cash transactions.Outgoings will involve predicting bills, wages, rates and taxes to be paid, and incoming cash will involve predicting cash sales, receipts from debtors, monies received from investors, and other sundry income.
Profit and Loss projection
At a basic level, this is a collation of all your projected trading income and trading expenses, collated for a trading period such as one year. So you make estimates of expense such as rent, electricity, licenses, subscriptions, advertising based on your knowledge of the business and your research. You will also need to be able to quantify you expected business income in terms of sales figures such as products sold or services rendered, and at what price.
Balance sheet projection
This can be regard as a monetary snapshot of your business, at a defined moment in time. Thus on one statement, you would have the value of your unsold products, your bank balances, cash in the till, debtors who owe you money, unpaid suppliers and other creditors, the monies you have invested into the business.
Cash flow projections would normally be prepared for up to three or five years in advance, depending on your requirements and their accuracy and usefulness depend a great deal on the accuracy of your research at the beginning of the process.
Once your cashflow projection is complete, you may at this point begin to see how feasible your future plans might be. Insofar as you're confident of your figures, a well designed cash flow projection can be the foundation of a strong business plan which inspires confidence in yourself and your business partners about the potential of your business. However, its important that as time progresses that your cashflow projection be revised to incorporate new information as it becomes available.
Eventually, it will be up to you the business person to work the plan, and make it happen.