Cash flow forecasting

How to use the ANZ cash flow forecast template

Key points in this article

  • Using market research
  • Check your capacity
  • Involve your accountant

It's essential to forecast and monitor your business’s cash flow. By utilising a cash flow forecast you’ll be able to plan ahead for the good times and the bad.

If you’re aware of an upcoming period when your business will hit a slow cash flow period, you’ll be able to plan ahead to arrange timely finance. Likewise, by knowing when you’ll have a period of strong cash flow, you can plan to expand.

Use accurate figures

Try to be as accurate as possible with your figures. It's worth putting some time and careful thought into getting these figures right as this forecast is usually the focus for:

  • banks
  • anyone reviewing your business financials.

At the bottom of the template, make detailed notes on the assumptions you've made in your forecast.

Rely on solid research to estimate sales

Use solid market research as well as your sales history to calculate accurate sales projections. If you haven’t started your business yet, thoroughly research your target market to assess realistic, future levels of sales.

You should also consider peak seasonal periods – cash flow usually isn’t consistent all year round.

Market research is an essential element for gaining a clearer picture of when cash will flow through your business

Estimate costs

Once you’ve estimated your sales for each month, you’ll be able to estimate your costs.

Again, you’ll need to explain in detail how you calculated these amounts. Make sure your own salary is realistic. Can you cover your personal living costs, or will you be draining too much out of your business too soon?

Check your capacity

If you estimate your cash flow for a month to be $50,000, consider how feasible this number really is. There are only so many hours in the day and you’ll only be able to deal with a certain number of customers.

Remember that even if you invoice $50,000 of sales in a month, you can’t guarantee the full amount will be paid on time. For example, you might estimate that:

  • 80% of invoices are paid in the month of billing.
  • 10% are paid a month later.
  • 10% are paid two months later.

Weigh up your expected capacity with when you believe invoices will be paid

Look for benchmarks

Find benchmarks for profit in your industry. If yours are notably different from the average, people assessing your business will want to know why.

Involve your accountant

It’s always a good idea to run your figures past your accountant before presenting your cash flow forecast to outside readers – such as potential lenders or investors.

Don't forget one-off items like accounting fees and your tax obligations. Many businesses struggle to find the cash to pay taxes when they’re due. Top of Form

Your accountant can help you estimate what your tax obligations are likely to be

Next steps

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