CASH FLOW PROJECTIONS

CASH FLOWS PROJECTIONS

Cash flow projection is a breakdown of physical cash that is expected to come in and out of your business. This includes calculating your income – cash sales and credit collection from your customers, loan from bank or friends and all of your expenses – operating expenses, capital asset acquisition, loan repayments etc, which will give your business a clear idea on how much cash you’ll be left over a specific period of time.

HOW IS CASH FLOW PROJECTION PREPARED?

A realistic cash flow projection for existing business starts with analysis of the previous operating activities which will form the basis of assumption for the current projections.

After analyzing previous financials for like three years backward, a set of assumptions if formed which will drive the the projections going forward.

Cash flow projection can be prepared for a period of twelve (12) Months, 24 months, 36 months or even 5 years as the case may be.

USES OF CASH FLOW PROJECTIONS

  1. It is used  for business planning
  2. It enables a business to know its future cash position and to plan for either cash deficit or surplus.
  3. A negative future cash balance enables business owner to make arrangement for alternative source of funding either through bank loan or other sources
  4. Excess future cash flows could be used to plan for investment of idle cash
  5. Commercial Bank usually require a cash flow projections as part of loan requirements.

                FOR REALISTIC CASH FLOW PROJECTIONS,

KINDLY CONTACT US @ OGBE FRIDAY& CO. (Chartered Accountants): +23465207253/info@ogbefirm.com OR visit our site @ www.ogbefirm.com

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