Cashflow management: the basics

Refinements to a simple cashflow forecast

There is no single best way to set out a cashflow forecast. However, some refinements to the most basic ways of setting out the information will give you a more sophisticated view of your business' situation.

You could, for example, separate cashflow for business operations from funding cashflow. This gives a clearer picture of the actual performance of your business and is a format that many accountants prefer.

Cashflow from operations

Includes inflows such as:

cash sales
receipts from credit sales in earlier periods
interest on savings

Includes outflows such as:

payments to suppliers
hire purchase and lease payments
expenses - rent, rates, insurance, utilities, telephone, etc
wages
taxes and National Insurance contributions
interest on loans and bank charges

Funding cashflows

Includes inflows such as:

loans from banks
increase in share capital

Includes outflows such as:

dividends paid
loans repaid

With these two types of cashflow separated you can gauge how self-sufficient the day-to-day working of your business is. A net outflow in operational cashflow is usually an indicator of problems that need to be addressed quickly.

Subjects covered in this guide

Introduction
What is cash?
Cash inflows and cash outflows
The principles of cashflow forecasting
Manage income and expenditure
Cashflow problems and how to avoid them
Using your cashflow forecast as a business tool
Cash management in action
Refinements to a simple cashflow forecast
Here's how I manage my cashflow

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