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| Monthly Cash Flow Projection Excel Template |
A cash flow projection is a forecast of cash funds a business anticipates receiving and paying out throughout the course of a given span of time, and the anticipated cash position at specific times during the period being projected.
[For the purpose of this projection, cash funds are defined as cash, checks, or money order, paid out or received.]
The purpose of preparing a cash flow projection is to determine shortages or excesses in cash from that necessary to operate the business during the time for which the projection is prepared. If cash shortages are revealed in the project, financial plans must be altered to provide more cash until a proper cash flow balance is obtained.
For example, more owner cash, loans, increased selling prices of products, or fewer credit sales to customers will provide more cash to the business. Ways to reduce the amount of cash paid out include having less inventory, reducing purchases of equipment or other fixed assets, or eliminating some operating expenses.
If excesses of cash are revealed, it might indicate excessive borrowing or idle money that could be "put to work." The objective is to finally develop a plan which, if followed, will provide a well-managed flow of cash.
The Spreadsheet: The cash flow projection worksheet in this file provides a systematic method of recording estimates of cash receipts and expenditures, which can be compared with actual receipts and expenditures as they become known. The entries listed in the spreadsheet will not necessarily apply to every business, and some entries may not be included which would be pertinent to specific businesses.
It is suggested, therefore, that you adopt the spreadsheet to the particular business for which the projection is being made, with appropriate changes in the entries as required.
Before the cash flow projection can be completed and a pricing "structure established, it is necessary to know or to estimate various important factors of the business, for example,
- What are the direct costs of the product or services per unit?
- What are the monthly or yearly costs of the operation?
- What is the sales price per unit of the product or service?
- Determine that the pricing structure provides this business with reasonable breakeven goals [including a reasonable net profit]
- when conservative sales goals are met.
- What are the available sources of cash, other than income from sales; for example, loans, equity capital, rent, or other sources?"
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