Projected Cash Flow Forecast

Let us chat about what is a projected cash flow forecast.

If you read the home page you will have gathered how important it is to control your cash flow in any business, if you do not then, you really are asking for trouble down the line.

Let us assume we build our spreadsheet and enter figures starting January at this point we may have already started our business and we can enter actual figures for that month.

We will need a list of sales, a list of purchases and we need to know the percentage of profit in our sales, in simple terms we buy for figure X and sell for figure Y our gross margin is the difference between the Y minus X = Z

Then we must list our fixed costs overheads like rent, power, telephones and so on, once we have built our forecast we can say that the total overhead for January is K. Next we will take the figure of Z and from this our gross margin we take away K our overheads, this leaves us with a figure N being what we have left over or in other words our net profit.

The beauty of having a sound cash flow forecast is that we are able to copy our figures across the columns for say January to December thus, we have created a projected cash flow forecast for 12 months going forward.

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