As a tool for cash flow management, the cash flow projection is critical—it shows you how your cash is expected to flow both in and out of your business. It’s designed to let you know when expenses are too high, when you might want to make moves to invest a cash flow surplus in growth and what your overall cash trends are. If you’re looking at expansion, the cash flow projection can help you determine what you’ll need to invest and how much liquidity you’ll have to do it. If you’re seeking funding, the cash flow projection lets any potential lender know that your business is a good credit risk and that you have the ability to handle a line of credit or a short-term loan. One note: Don’t confuse a cash flow projection with your cash flow statement. The cash flow statement is a historical view of your cash flow; of how it’s actually moved in and out of the business. While the cash flow statement is about the past, the cash flow projection is all about the cash you plan to generate and spend going forward for a specific time period. Typically, a cash flow projection offers a monthly view of anticipated cash flow over a one-year period. Generally, it consists of three key components:
The following headings can be used to build your own cash flow projection.
This is just a sample template—you’ll need to add and delete the Revenue and Disbursement categories that are most applicable to your own business. Remember that your closing balance is carried over to the next month at the end of each month. (For a free Microsoft Excel cash flow projection template, go to http://office.microsoft.com/enus/templates/TC011132361033.aspx.) Bear in mind that when putting your cash flow projection together that it’s best to be conservative in your projected sales estimates—the area that tends to be the most problematic, as the tendency is to be overly optimistic. For more on determining projected sales, check out “Three Methods of Sales Forecasting” at http://sbinfocanada.about. com/od/cashflowmgt.a.salesforecast.htm.
Sources: “The Cash Flow Projection,” About.com Small Business
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Keep Close Tabs on your Cash Web Cash Manager
The health of any business is founded on how well you manage your cash, control costs and maximize revenue. In a slowing economy, closely monitoring your cash becomes even more critical. At Salem Five, we have the tools that can make tracking every dollar, expense and excess cash easier and more convenient. And you can obtain that information 24 hours a day, seven days a week; all you need is internet access. With Salem Five’s Web Cash Manager you can:
- streamline daily cash management;
- transfer, distribute or consolidate funds between accounts;
- pay most state and local taxes automatically;
- offer employees direct deposit of payroll;
- pay vendors electronically;
- view summary or detailed transaction
- access check payment information;
- place stop-payment orders;
- import data from spreadsheets and accounting programs; and
- print reports in formats that work for your business.
Track your cash quickly and conveniently with Web Cash Manager. For a free demo of the service, To find out more about how you can set up an account, please call us at 978-720-5318.