Category: Cash Flow Management

Debit and credit in a cash flow forecast is important where you’re including both a forecast profit and loss and a projected balance sheet as well. Whereas if you’re only putting together a cash flow forecast on its own, then debit and credit isn’t a concern. Having said that, it is always recommended to prepare a cash flow forecast that’s accompanies by a projected balance sheet, as you’ll then have the added comfort that your figures balance and make sense.

Cash flow software with stock or inventory functionality will include stock on the projected balance sheet, the cash flow forecast itself, and the forecast income statement or projected profit and loss. Which means that the closing stock or inventory will be on the projected balance sheet report at the end of each month or period. The cost of purchasing the raw materials or products will be shown as an outgoing on the cash flow forecast. Plus the forecast profit and loss will include the net cost of sale.

Cash flow software with tax calculation functionality will include tax on the projected balance sheet, the cash flow forecast itself, and the forecast income statement or projected profit and loss. Which means that the closing tax liability or refund debtor will be on the projected balance sheet report at the end of each month or period. The tax payment or refund will be shown as an outgoing or an income source on the cash flow forecast. Plus the forecast profit and loss will include an the tax charge.

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.