Operating Cash Flow and Net Revenue
Operating cash flow represents cash forecast to be generated exclusively by core trading operations.
Everything alse such as fixed asset acquisition, taxes and dividends are added / subtracted to arrive ar net cash flow. Both operating and net cash flow forecasts are produced by Figurewizard.
Operating cash flow starts with operating revenue which is essentially the net profit less depreciation (as no cash is involved) plus tax and interest charges as these do not arise from trading operations.
Operating Cash Flow and Working Capital
The next step is to add the difference between the forecast year's current assets and liabilities. These relate exclusively to trading as follows:
Current assets
Cash in hand
Accounts Receivable
Stock / Inventory
Current Liabilities
Trade Creditors
Sundry Creditors
VAT
Adding these differences to operating revenue returns the operating cash flow forecast.
Monthly Bank Balances and Undrawn Cash Facilities
This cash flow forecast is also automatically calculated and applied by Figurewizard.
It starts with the monthly bank balance B/Fwd plus a breakdown of all income and expenditure. The value of undrawn external financing facilities such as the bank overdraft and available cash from factoring or invoice discounting if selected are added to return the actual value of cash available to be business in any given month.
Testing Figurewizard Forecasts
Visitors to this site are free to test Figurewizard online by selecting "create a forecast" to take control of the sample forecast. This enables the entries that make up the sample forecast to be changed, which in turn will change the profit and loss, balance sheet and cash flow forecasts.
To view working examples of all of the cash flow forecasts Figurewizard produces, follow the links below.
What happens to operating cash flow if I put in more capital? Does it make it better than before?
Cash borrowed by a company from a director or any other source will improve net cash flow but at the same time show an increase forecast borrowings; ie. finance. That is important because while cash flow pressures are reduced by the fact of the loan, the price for that is perceived greater exposure to the debt that is keeping the business afloat.
Loans must therefore always be accompanied by a plan to increase profits with strict controls for expenditure to improve the all-important operating cash flow.
My Figurewizard forecast monthly bank balance, which was showing a mix of credit and overdraft balances now shows a string of zero balances, since I made a few changes to my figures. Why should that cause every month to show this?
When you made changes did you select factoring / invoice discounting?
Yes I did select factoring but why would that make a difference?
Figurewizard's forecast monthly bank balances show zero when factoring / invoice discounting is selected as only enough cash is drawn to clear the account. The balance of available cash are credited to the factoring account; a current asset. As all of your months' bank balances are at zero your cash flow forecasts are good.
On the other hand if factoring is selected and the bank is showing a month or months overdrawn it is strongly recommended to use the What-If calculator to come up with changes to expenditure in the business plan to eliminate that.