SET THE CONTEXT
MARKET ANALYSIS AND BUSINESS POSITIONING
DEVELOP YOUR SALES FORECAST
DEVELOP YOUR OPERATIONAL AND COST PLAN
DEVELOP YOUR CASH FLOW PROJECTIONS
DETERMINE YOUR FINANCING STRATEGY
INTERPRETING THE INCOME STATEMENT
INTERPRETING THE BALANCE SHEET
INTERPRETING THE CASH FLOW STATEMENT
Benefits of Cash Flow Projections
A cash flow projection is a forecast of how much cash you expect to come into and go out of your business in the future.
It enables you to predict when cash shortfalls are likely to occur so you can take action to avoid them.
As a result, you will build better relationships with suppliers and receive better payment terms.
It also prevents business interruptions.
Other benefits include:
- It can help you decide when to invest idle cash reserves in short-term loans or stock to increase business (interest) income
- Sound cash flow management makes the business attractive to investors and lenders
- The bank always requests a detailed cash flow forecast before they consider loaning any money
- Growing businesses are often hungry for cash. You have to invest much more than other companies do, and profits usually aren’t enough to cover expenses
- Therefore, having a cash flow projection is essential.