Cashflow forecasts!

Ross,

Although cash is certain king for a service business like yours cashflow shouldn’t be a big issue at all if you are doing it right. In fact I would go so far as suggesting a cash flow was probably the least useful item in your business plan as its nigh on impossible to do one with any accuracy. I personally would concentrate looking at break even points and your general cash cycle to model your cash requirements if you do grow/stagnate etc. This gives a more useful set of metrics and way of understanding your business rather then trying to predict what your sales might be like in 2 years time and how quickly your debtors may/may not pay at that point. If the banks insist on them I would suggest you present 3 cash flows for the purposes of your borrowing - high/mid/low. There is little point pretending that your cash flow forecasts will be in the least bit accurate, quite frankly if your bank manager puts any store by them they are probably very green indeed although you will almost certainly need one so they can tick the relevant box on their form.

Regards,
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James Smith
Chartered Accountant
www.jamesesmith.co.uk
01235 536 773

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