Cash flow forecast and budgets

It takes far more than maths alone to create accurate cash flow forecasts or budget plans. That’s why, with MAH, your cash flow forecasts and budgets will be taken care of by a chartered accountant with a wealth of real-world financial experience.

We provide the following core services for cash flow forecasts and budgets:

  • Building cash flow forecasts and models for analysis and funding purposes
  • Providing impairment reviews and critically evaluating cash flow, profit & loss forecasts and underlying assumptions to assess the ability to continue as a going concern
  • Conducting sensitivity analysis and ‘worst case scenario’ analysis

How do you build the most accurate cash flow forecast or budget?

Here at MAH, we put every shred of our accountancy knowledge, business knowledge and financial knowledge into your cash flow forecast or budget.

Scrupulous attention to detail is applied to every piece of data and research to create a cash flow forecast or budget which is as accurate as possible. This not only helps if you aim to secure capital, but it also helps you get an insight into potential future finances which you can really trust.

As business finance specialists, MAH applies a critical level of analysis to build up a cash flow forecast or budget which is suitable for any type of business – from a small start-up to a large corporation or AIM listed plc.

Building forecasts

We make sure that your forecast or budget will be able to stand up to the most in-depth external scrutiny, especially if you are seeking capital injection from an investor or bank.

Your cash flow forecast or budget can be as tailored as you require. We can create it entirely from scratch, or we can base it on existing models which are suitable for your business – based on judgment with our extensive cash flow forecast and budget experience.

Using the latest forecast and budgeting models

MAH’s wealth of experience in this field means that we’re equipped with a range of financial strategies and projection models to create a truly premium-calibre cash flow forecast or budget.

Sales

In a new startup or project, the projected sales are completely unknown, so it is the depth of research which will decide whether estimated sales levels will turn out to be accurate.

  • Is there any data or research behind the figures, or are they largely based on guesswork?
  • How reasonable, realistic and reliable is the data or research?
  • What are the key assumptions, and are they reasonable and realistic?
  • Can the sales figures from previous projects (or even the sales levels of direct competitors) offer further insight into potential sales?
  • Are there any memorandums of understanding (MOU) or firm orders already agreed which would form a foundation of expected sales?
  • Is there a risk that orders cannot be met in unforeseen circumstances, and how high are these risks?
  • In long-term contracts, what is the genuine likelihood of meeting major milestones that are needed to receive payments on account?

If the business is already established, our aim is to take all relevant sales data and analyse marketing strategies, analyse competition, analyse target audiences and analyse the product or service to project future sales. This may also involve the estimation of customers to renew contracts or place future orders.

Sensitivity analysis should also be performed to adjust for the worst case scenario, or  lower sales to ascertain the impact on cashflow.

Costs

Costs are estimated based on the financial inputs required to meet projected (or targeted) sales levels.

  • Is the data or research behind the costs both reasonable and realistic?
  • Are there any provisions for wastage or inefficiencies?
  • Are any overheads known in advance, and can they be factored in?
  • Have investments and all costs been taken into consideration?

Excessive Costs

Whilst some forms of large expenditure may be necessary to attract key staff or promote the correct image in front of key clients, we can analyse the impact of large non-essential costs such as large director salaries, over-generous bonuses or any type of luxury spending and the harm it could do to the business cash flow – especially during start-up periods where cost limitation is essential until the business is healthier.

Growth

Growth is often overestimated in forecasts, so we analyse the method and data behind the percentages applied, and then calculate a more realistic growth forecast which minimises the risk of having to cut costs in future.

Debtors cycle

  • On average, how long after the supply of goods or services will the payment be received, and how will it influence the cash flow?
  • Are the debtors cycle estimations accurate, and has the profile and credit worthiness or anticipated customers been factored in?
  • Would a large percentage of sales rely on a small number of customers, and how would this influence the forecast?
  • Could large or important customers use their dominant position to delay payments?
  • Are there any early payment discounts which must be estimated and factored in?

Creditors cycle

  • If the creditors cycle is significantly shorter than the debtors cycle, then a choke point may arise which must be accounted for.
  • Is there a strategy or system in place to ensure that purchase orders are not placed too early?

Overtrading

A serious error in your cash flow can occur when businesses incur too many purchases too soon, and then must pay for these before income is received from customers, creating a negative balance which can rapidly spiral out of control. Alternatively, cash may be tied up in stock or investments, which makes it unsuitable for use to maintain positive cash flow. Such scenarios are identified if applicable.

Cash burn

Your business may not begin trading immediately, for example, during a R&D period. If so, what is the monthly expenditure and how long will the cash last during this period? Also, how realistic is the timescale estimation before trading occurs, and what impact would this have if the estimation is incorrect?

Cash shortfall

  • Are there any points in the forecast period where there is a higher risk of cash falling into dangerously low levels? These situations must be identified and acknowledged.
  • If an unexpected situation occurred where a major sale was delayed or a customer paid late, how would it impact the business’ ability to continue trading?
  • Can further finance be injected if required?

Debt/capital

  • If bank finance is included, how comfortably can the interest/loan repayments be made, and what are the risks of a delayed payment, missing payment or the loan being called in?
  • Is there an overdraft or credit facility? If so, how may this be used within the business?
  • Are there any expectations for the owners to withdraw significant sums for personal reasons? If so, how might this impact the business?
  • What level of shareholder support is available, and is there a possibility of delaying repayment until the business is – profitable?
  • What are the possibilities of raising further finance from banks / shareholders, and what is the likelihood of this occurring?

This is just an example of the depth of analysis MAH would perform on your cash flow forecast or budget. We don’t just crunch numbers. We look at it from a business perspective, apply real world knowledge and ultimately help you to see your future business from a more realistic and accurate perspective. It makes securing finance easier, and it helps you to see potential pitfalls or difficulties before they become a threat.[/toggle]

Get in touch for a free no obligation consultation

For a free no obligation consultation to see how we can help you with your cash flow forecast or budget, click here or call us on 020 7100 3610.