Accounting

How to Project Your Cash Flow Statement for 2017

By Gina Hall

The new year can bring uncertainty, but your cash flow statement doesn’t need to be a concern.

Cash flow statements can easily tell you how much revenue you have coming in and how much you have going out. The data on the cash flow statement can help indicate your enterprise’s liquidity and predict where your company will stand financially in the future.

Cash flow problems can lead to business failure, but you can build some great habits in the new year. Building accurate forecasts can be challenging, but it will help you prepare for money shortfalls and make intelligent decisions when you have plenty of cash on hand.

Here are some tips and tricks to get your cash flow statement under control.

Know what belongs on your cash flow statement

Figuring out what to include on your cash flow statement is half the battle. There are three major areas to include:

  • Operating activities: These include revenue from selling products and services, interest and dividends and other cash receipts. Outflow from operating activities includes payroll costs, payments to suppliers and vendors, rent, utilities, insurance, taxes, and other overhead costs.
  • Investing activities: These include sales of business assets (other than inventory), loan payments and other sales that are not part of the average course of business. Outflow includes purchases of capital equipment and loans granted by the company.
  • Financing activities: These include borrowed money and the proceeds from the sale of the securities. Outflow incorporates debt service and dividend payments.

Build a payment schedule

Knowing when you get paid is crucial to creating an accurate cash flow statement. Try calendaring the dates when you invoice each month so you can generate a reliable revenue model for each month. Even though you set a regular schedule, don’t be too idealistic about your clients’ payment habits. Invoices often take at least 30 days to roll in and many clients are late with those payments.

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Make sales predictions

Cash flow statements include accounts receivable, accounts payable, inventory, capital expenditures, and debt service. By making sales predictions, you can establish that your company will have enough cash each month to cover what you owe.

Build a sales forecast that projects several months ahead—or one that covers all of 2017. If you’ve been in business for more than a year, base your sales predictions on last year’s revenue. If you’re just starting a business, project sales based on research into your competition.

Plan for the unexpected

Unexpected costs will sneak up on you, so prepare in advance. Equipment repairs, new hires, or a sudden increase in material costs shouldn’t send you scurrying for cash. Small business consultants suggest that you save at least 10 percent of your monthly revenue for minor emergencies.

If you do find yourself in a pinch, Fundbox advances the full value of your invoice, whether it be covering payroll or an urgent equipment repair—or even if you want to invest in growing your business by taking on a new project. With Fundbox, funds can be available in your bank account as soon as the next day, and you can choose between 12 and 24-week repayment terms. Repay early, and they’ll waive all remaining fees. Use the cash to cover expenses while you wait on invoices to come in.

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