Cash Flow Projections

Cash Flow Projections


You simply cannot think of doing any business without considering theimportant element called currency. The first question that you might put to your financial advisor or arranging company is "How are you going to arrange cash for my business?" CFO Services has faced this question a number of times before and has dealt with it in the most effective manner. Obviously a bank is the first place where you run to for your cash requirements.

Cash Flow Management

But banks are keen on helping only those companies that show promising cash flow management skills. You might not be having money at the moment, but your financial statements and the way you plan to repay the money should be credible to the lending authorities.

Control on business

Your financial statements and cash predictions tell the bank if you are controlling your business or vice versa. Naturally, they'll keenly extend their supportto only those companies that are in the former situation. For the bank to get confidence in you and your business provide them withhigh quality and precise financial statements with undeterred punctuality, whenever required.Asking for cash from the bank is not as easy as asking for some cash from a friend when in need of money.

Questions you would want to answer

Are you clear with the exact amount of money you'll need for your business? Money lenders hate vague figures. Does your cash flow projection ensure that you'll have access to money whenever you want it? Have you decided upon a feasible line of credit? CFO Services helps you in preparing your answers to these questions with our knowledge and expertise and will also help you in deciding upon the line of credit best suited for your purposes. Always decide upon your line of credit before your reserve cash is exhausted, otherwise you might have to restrict sales for a later period, till you are comfortable with your cash reserves.

Choose wisely

Most often entrepreneurs don't have a well-defined idea as to what they'd like to finance in their business. The Cash flow projection experts of CFO Services help the entrepreneurs in identifying those aspects that need financing. Generally business owners try to finance one aspect by adjusting money from another aspect. You might use the cash for operations on capital equipment and exhaust yourself of money for operations. The line of credit that you apply for financing your operations might actually prove to be costlier than the line for credit for capital equipment. The Cash Flow Projections experts save you from such expensive mistakes by helping you take the correct decision.

CFO Services caters consultancy services to the small business sector. The CFO Services partners have a lot of service providers with them. If they find that a particular bank is reluctant to help you out with cash, they'll always find another bank that will help you out. So, when associated with CFO Services you need not worry about arrangement of financial resources for your business.

Sources of finance

Banks are the best sources finance for your business. The CFO Services Cash Flow experts are going to direct you to these alternative sources which may be investment bankers and equity financiers. Non bankable financial aid can also be arranged for, based upon circumstances. For example, you need funding for taking up a major government project. The CFO Services Cash Flow projection consultants will introduce you to their network of alternative sources of funding.

Pull funds from the business

Your CFO Services Cash Flow Projections consultants will show you ways to pull out funds from your own business. Suppose your sales have increased but you are still short of cash, we will show you ways to adjust your internal business cash flow to create liquidity in the system. If your costs are more than your sales, you run out of cash. If your stocks are not comparable to your counterparts in the industry, you might run out of cash. If you aren't maximizing terms on payables you run out of cash.

Financial Technicalities

Line of credit underpayment, inappropriate bank accounts for cash maximization, inappropriate credit card and sweep account processing of cash, unreasonable and nonnegotiable vendor terms, non-usage of volume discounts are some of the financial technicalities that most entrepreneurs are not aware of. Our Cash Flow Projections Consultants educate and assist businessmen on these technicalities and help them take the right decision.

Competitors – Parameters for your business

In business you've always got to compare yourself to your counterparts, though not out of jealousy, but to detect any deviations and rectify them. You need to compare the costs borne by you to those borne by your contemporaries in the industry. This is where your CFO Services Cash Flow Consultant is going to help you by drawing in useful comparisons with your competitors in your area, region and country.

For example, you might be spending more on your human resources than others. Your gross margin might show abnormal trends. Your position in comparison to your counterparts gives you a clear picture of your business so that you can start making improvements in the situation with the help of your consultants.

Cash – Heart of the business

Cash remains with you as long as you focus on it. You should realize that cash is the life blood of any business and if it stops flowing, the business is dead. In order to prevent this, you've got to develop a Cash Flow Statement before hand. You can develop an annual cash flow statement which will show the predicted flow for the coming 12 months. This will include the cash sources and your cash expenditures.

This is how you make a monthly cash flow statement (segment-wise):
Sales January Februrary March April May June July August
Product 1                
Product 2                
Product 3                

You make a table for 12 months and write down the predicted sales for different products in the different months. You can also do this at the total sales level of your company, but recording the sales at the individual product level is going to give you a more accurate picture of your expenditure. The next thing for you to do would be to determine the amount of cash you'll be able to collect on these sales within given periods of time. You can do this at the product level or at the company level using historical estimates.

For example you might want to know how much money you'd be collecting after 1 month, after 2 months, then 3 months from the sales. This will give you an estimate of the inflow of cash for the next 12 months.

The next thing that you'll have to tabulate is the costs that you'd have to bear on each product for the next 12 months. This will include your expenditure on raw materials, the labour charges and overhead charges like the occupancy expenditure and insurance.

This is how you make the table:
  January Februrary March April

Product 1

> Raw materials
> Labour
> Overhead

Product 2        
Product 3        
Defining the duration

After precisely estimating the costs and recording them in the tabulated form, you've got to define the duration in which payments for these costs have to be made. The payment terms with the vendor will tell you how much cash you've got to disburse in a given period of time on the costs on a weekly, fortnightly, or a monthly basis.

Operational expenditures

Apart from costs on product manufacture, you'll have other operational expenditures like sales and administrative, research and development and other expenditures. These operational costs also need to be projected based on the terms of payment agreed upon with the vendors. It can be on a monthly, 45 days or quarterly basis. The quarterly taxes also need to be included in the costs.

Final Chart

After this, you make the final chart that contains a blueprint of your entire cash flow system. It includes your starting cash balance, cash receivables, total cash inflow, cash disbursed, total cash outflow and the cash deficits on a monthly basis for the next 12 months.

Cash January Februrary March April May June July August
Starting Cash Balance                
Cash Receivables Sales                
Total Cash Inflow                
Cash Disbursed :

> Raw materials
> Labour
> Overhead

Total Cash Outflow                
Cash Excess or Deficit                

This total picture of the money circulatory system will give you an idea of where you are spending more or lacking in funds. If you are having excess cash at the end of the flow, you have no reason to worry. But if there is a deficit you've got to take financial aid from lenders, work out longer payment terms with vendors or apply sales boosting strategies like offering products at a discount to customers on prompt payments.

Unidentified Happenings

The kind of a cash flow prediction will protect you from any untoward happenings. If you see any impending danger you can always discuss this with your CFO Services advisors and steer yourself clear from the problems. You can arrange for help from banks and other aiding institutions. You can take corrective action and rectify any business problems that you might possibly encounter in future.

Your cash flow projections can be analyzed at the minutest levels. If you find that your cash flow is showing variations on a weekly basis, you can always tabulate your cash flow details on a weekly basis for the coming three to four months or so. The CFO services cash flow management wing is going to help you out with that.

The Cash Flow System developed by CFO services gives you an opportunity to have an in depth view of the dynamics of your business finances. This will let you know whether your profitability standards are up to the mark and if you have sufficient working capital with you. This modular analysis will let you know the trouble areas and what you've got to do to rectify those areas.

Contact CFO Services to know how ourCash Flow Projection System is going to guide and help you to keep healthy cash flow in your business.