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Great article Valme.
Perhaps the next one should be "how to add up a profit and loss account" for those accountants who haven't learned to do that yet!
Then we can move onto "how to save a spreadsheet". That should be really valuable.
If you are going to post "content" then please make it worth reading or don't bother.
Yet more space taken up at the expense of valuable "content".
Hi Trethi Teg,
Thanks for your comment. We try to vary the levels of difficulty in our 'how to' articles.
In the case of Excel, we mainly try to publish tutorials catering for intermediate and advanced users, but also include a few for our student audience as well, which tend to be quite popular.
While I'm glad that you don't have the need for this guide, the title is fairly self-explanatory. I'd suggest that next time you spot a similar heading you don't click on the link.
Best wishes and have a good day,
Tom
Sorry Valme, this is a sort of Noddy's Guide to Cash Flow Forecasting that could easily have been written by a banker.
If you want to write a cash flow forecast for a slightly (or even significantly) more grown up business then you need to:
1 Project the profit and loss account, monthly or quarterly, matching costs to revenue on a proper accruals basis.
2 Project the balance sheet, also monthly or quarterly. Some of the balance sheet entries (such as debtors and creditors) will be informed by the levels of business indicated in the profit and loss account.
3 Then you can derive the cash flow from the two.
A cash flow forecast that does not include both a profit and loss account and a balance sheet lacks integrity, and is simply not to be trusted.
This is not a complex thing to do, and it's what accountants are for. A banker would not know where to begin.
I have to agree with John Francis. A "stand alone" monthly cash flow forecast lacks integrity. It really needs to be linked to a forecast of P&L and balance sheet, and should take into account invoicing dates, profile of debtors collection, etc. I would suggest that a "stand alone" cash flow forecast could be done alongside the monthly forecast (that would be linked to monthly P&L and balance sheet forecasts) but should be a daily forecast, as this would highlight any problems that may occur during the month. For example, if all your receipts come in at the month end and your payments go out during the month, there may well be an overdrawn situation during the month, even though the month end forecast appears to be well in credit.
I think it's a good idea to be a little careful as to the assumptions we make about the spreadsheet capabilities of others. Many of us will have come across examples of people doing some very unexpected things in spreadsheets - such as using a calculator to add up values in cells and then typing the result back into the spreadsheet. It doesn't hurt to restate the basics now and again.