Cashflow descriptionCashflowA cashflow is the most important indicator as to how your business will survive, especially over the first 12 months. If you run out of money, your business will not last and a cashflow will help you assess when cash might be tight, so you can plan a solution in advance (such as contributing more of your own money, borrowing money or arranging an overdraft with the Bank). The absolute worst scenario is running out of money and not being aware it was going to happen.Tip: Its always a good idea to run all your figures past your accountant before you present your cashflow to outside readers such as potential lenders or investors.Tip: Remember that just because you invoice out $50,000 of sales in a month, you cant guarantee that it will all be paid on time. For example you might decide to estimate 80% of sales come in on time, 10% a month later, and 10% two months later (this is not a problem if you are a cash only business such as a retail business).When preparing your cashflow remember:1. A good cashflow is not just a spreadsheet of numbers that you have quickly made up. It will be the document that anyone looking at your business will spend the most time on. If part of this is weak, or you have no real idea why you put the numbers in that you did, then outside people will think what else is weak in your plan? As you complete the cashflow, make notes as to the assumptions that underline these figures. Then write them into the additional notes so anyone reading your cashflow will have some understanding as to how the calculations were determined.3. Once you have outlined the sales for each month, you will then be able to estimate your costs. Again, you need to explain in detail how you calculated these amounts. Some costs can be actual (you can find out rent and lease costs, set up costs like office supplies, advertising) and some will be estimates (power and phone charges).4. Check your capacity. If you state in your cashflow $50,000 for a month, then can you physically do this? You will only have a certain amount of hours in the day, or only be able to deal with a certain number of customers.2. Your forecast for the business reflects a realistic balance between proper market-driven sales projections (not guessing!) and an accurate costing and pricing of your goods and services. Even though you have not started yet, the amount of time you spend on assessing a realistic sales level is crucial. You should also outline exactly how you came to the sales figures for each month (and dont forget seasonality it is highly unlikely that you will have the same sales level for all 12 months of the year).5. Find out your industry information such as average net profit and gross profit amounts. If you are different from the average, people assessing your business will want to know why.6. Make sure your drawings are realistic. Do not take out too much money, or too little (you have to live).7. Do not forget one off items like accounting fees and your tax obligations many businesses struggle to find the cash to pay taxes when they fall due. It is very important to get an accountant to help you estimate what your likely tax obligations will be.8. If you can, prepare at least two years of cashflow (it is not recommended to prepare five years of cashflows, as it is almost impossible to predict what will happen so far ahead).

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Cashflow forecastCashflow forecastBe prepared to defend your estimates on this basis:Will I have enough working capital?Do you have the capacity to generate the sales figures you've entered in the forecast?Do they make sense considered against your expenses, proposed drawings, etc?Have you taken seasonality into account?JULYAUGUSTSEPTEMBEROCTOBERNOVEMBERDECEMBERJANUARYFEBRUARYMARCHAPRILMAYJUNEExpectedActualExpectedActualExpectedActualExpectedActualExpectedActualExpectedActualExpectedActualExpectedActualExpectedActualExpectedActualExpectedActualExpectedActualRECEIPTSCash SalesCredit SalesOther Revenue(A) Total Receipts000000000000000000000000LESS PAYMENTS*WagesDrawingsOverheads (rent, power, etc.)MarketingRepayment of loansGST paymentsIncome tax paymentsMaterials and stockOther payments(B) Total cash payments000000000000000000000000(C) NET CASHFLOW (A-B)**000000000000000000000000(D) Opening bank balance***000000000000000000000000Closing bank balance (D+C)000000000000000000000000This document is intended to provide general information only and should not be relied upon in substitution for professional legal and financial advice.*Enter all outgoing expenses including money spent on staff, you and the business.While due care has been taken in preparing this document, no warranty as to the accuracy of the information contained within this document is given.**The difference between the amount of money going out and the amount of money coming in.No liability is accepted by any member of the ANZ Group of companies for any error or omission, or any loss caused to any person relying on the***Use the closing bank balance from the previous month as your opening balance here.information contained in this document, except where such liability cannot be excluded.

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