Cash Flow Forecasts
Figurewizard produces three important cash flow forecasts as follows:
Monthly Budgeted Cash Flow, Bank and Undrawn Financing
Operating Cash Flow, Net Cash Flow and External Finance
Monthly Cash Flow to Include Factoring or Supply Chain Finance
Both of these (and a lot else besides) can be updated with single clicks of a mouse, which will immediately revise every forecast in real time using the unique Universal What-If Calculator.
Three Cash Flow Calculators
Figurewizard has two built in cash flow calculators to enable planning of cash flow forecast scenarios: They are:
Dividends, Liquidity and Cash Flow Calculator
These calculators are built into the system. To produce these and all of the forecasts, nothing more is needed beyond your projected figures for capital, loans, including overdrafts, sales, purchases, overheads, investments and simple cash ratios.
Budgeted Cash Flow Forecast
This analyses income from turnover, the sale of assets, usage of finance and VAT refunds if aplicable, less purchases, operating overhead, finance repayments, VAT. interest. corporation tax and dividends.
All of this is all calculated by the system from your original projected figures and nothing else. For example, VAT and corporation tax are automatically calculated and applied to the forecasts by the system as you are emtering those figures.
There are options too for includimg letters of credit as a % of sales and how many months to receiving the goods and factoring / supply chain finance, plus annual % interest and service charges.
Operating Cash Flow Forecast
This describes cash flow arising solely from trading activities (operations) and is calculated by adding the year's operating revenue to changes current assets and liabilities.
Operating cash flow is a major issue for banks and other providers of finance. It is often regarded as being a test to establish whether or not a business seeking finance will have sufficient cash flow to to service the cost and repayments.
Net Cash Flow Forecast
The forecasts for income and expenditure that are unconnected with core trading of the business are added to operating cash flow in order to establish net cash flow. This is then balanced against the increase / decrease that is forecast for sources of external financing such as from bank overdrafts, loans, asset finance and so on.
As with the profits and balance sheet forecasts, all of these cash flow forecasts are automatically would have been calculated by our system simply from your figures for sales, profit margin, overheads and so on.
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Take the director of a company with negative net current assets where he is prepared to make a long term loan perhaps for five years to make up the difference. Does that improve the company's credit rating and does it then make it possible to negotiate a better overdraft and other loans?
Apart from improving the bank balance, a long term loan made to a company will improve liquidity (net current assets) as long as an agreement is in force specifying the date when repayment is due.
There are two kinds of balance sheet liabilities: a). Long term - repayable in more than twelve months and b). Current - repayable within twelve months. That means that if the loan term is specified for five years, during the first four of those years the cash arising from the loan improves current assets but its liability (being long term) is not itself current.
As a result, net current assets and therefore balance sheet liquidity will benefit from the value of the loan during those four years. It also means however that from the end of the fourth year that liquidity benefit disappears.
Whether or not this is going to impress a bank or other lender will depend on stating a positive case as to why the company needs more financial support on top of a loan by the director. We suggest that's where a set of Figurewizard profit, liquidity and cash flow forecasts could come in very handy.
Just as important when forecasting cash flow is the little matter of operating and net cash flows. Your five year loan will only feature there in year one by adding its value to financing from loans with a corresponding decrease in bank borrowings or increase in funds if the bank account is in credit. Nothing will be credited to either operating or net cash flows.
The absence of any advantage to operating cash flow is important because a bank or any other lender with their head screwed on will always look for that (or work it out for themselves from the P & L and balance sheet) to establish whether or not the company's trading is capable of generating enough cash to service new debt.