Category: Business Planning

Cash flow software with loan options and functionality will include these on the forecast balance sheet, the cash flow forecast itself, and the forecast income statement or projected profit and loss. Which means that the closing loan liability will be on the projected balance sheet report at the end of each month or period. The initial loan advance will be shown as an income source on the cash flow forecast. The loan repayments will be included as an outgoing cost on the cash flow forecast. Plus the forecast profit and loss will include an interest expense in the overheads section.

The balance sheet is a summary of the financial balances of a company at any given period end. An income statement (or profit and loss statement) is a financial statement or report that summarises income earned from a business’s trade and costs incurred in running that trade. Whereas a cash flow (or cash flow forecast) is a plan that shows how much money a business expects to receive in and pay out over a given period of time in the future.

The difference between a cash flow forecast and a cash flow statement: A cash flow forecast or projection is looking into the future to predict future cash flows; A cash flow statement is an actual representation of transactions that have already taken place. Having said that, you can also include a cash flow statement in your forecast reports too.

How you estimate future cash flows is to begin with your business’s cash at the start of your cash flow forecast period. Next you need to estimate your incoming cash for each month of the forecast period. Which is followed by estimating expenses for each month of the same period. Then add the estimated income to the opening balance figure, then deduct the estimated expenses, which will give you your future cash flow balance.

Cash flow software with assets and liabilities functionality will include these on the forecast balance sheet. Which means that whilst the cash flow reports take account of the incoming cash and outgoing expenditure, the closing assets (for example your cash balance, amounts owed by customers, inventories or stock, other debtors and prepayments and fixed assets) and closing liabilities (for example, amounts owed to suppliers, amounts owed in VAT and tax, accruals, other creditors and loans) will be on the balance sheet report at the end of each month or period.