Cash flow - and imporant part of your business plan

The importance of a cash flow forecast in your business plan

29 April 2015

You've finally sat down to write your business plan, but where do you start? What needs to be included and in what order?

This article looks at the importance of including a cash flow forecast in your business plan and how you can build a successful business plan around it.

What is Cash flow?

Cash flow is the accessible money you have in your business at any given point in time. It is important for you, your business partners, investors and your team to know what your cash flow situation is at the present but also, what it will be at future points in time.

What is a Cash flow forecast?

Cash flow forecasting is a vital part of your business plan because it looks into the future of your business and informs the rest of your business plan. You will need to refer back to your cash flow forecast when planning the rest of your business decisions.

Demonstrate your business abilities

Having a cash flow forecast as part of your business plan shows all of your key stakeholders (investors, mentors, partners, sponsors, bank manager) that you are taking the future of your business seriously. It demonstrates that the business plan you are proposing is based on actual numbers that add up and not on guesses, estimates or hunches.

Whether your business plan is for 12 months, 3 years or 5 years, your cash flow forecast will be the key piece of data that will underpin your proposals. You will be able to show why you have chosen to make certain decisions at certain times and exactly what impact those decisions are likely to have on your business.

Being able to show the data behind business decisions will position you as both a knowledgeable and experienced business person who understands the importance of data, numbers and finance within their business.

The saying goes 'talk is cheap' and it often can be in so many business plans but having a factual, robust cash flow forecast as part of your business plan shows there is more to you and your new venture than just talk.

Build trust in you and your business

It is important in business, and especially as a start-up, to inspire confidence from those around you. There will be a number of people involved in your new venture, either directly or indirectly, who will all need to believe, confidently, in you and your ideas because, until your business becomes a reality, your ideas and your ability to bring them to fruition are all your stakeholders have.

A cash flow forecast will inspire trust and confidence in you and your business plan because it uses facts and figures to underpin your ideas and theories.

Reducing the risk is key to people believing in you and your business idea and that is exactly what including your cash flow forecast in your business plan will do; reduce the risk of failure.

Publish a professional forecast

So we understand why it is important to include a cash flow forecast in our business plan but does it matter in what format? Can you just stick an excel spreadsheet in there and that's that?

No. A spreadsheet is vulnerable to human error and relies solely on all formulae being entered correctly and not changing. Spreadsheets are also not intuitive, if you add in rows or columns as you build your cash flow forecast, the formulae do not automatically update to accommodate these new data perameters. This means you could be basing your entire business plan on a cash flow forecast which is inaccurate, and you'd never know!

Finanscapes provide an intuitive, professional-looking cash flow forecast which shows a graphical top-level representation of your cash flow forecast and then allows you to drill down into the data behind it.

With our cash flow forecasting tool you can publish your professional, error-free cash flow forecast to include in your business plan or share it securely and directly with your mentor, investors or bank manager.

We have created a simple video showing you how easy it is to publish your cash flow forecast using our software.

More than cash flow forecasting

Of course, it's not just your cash flow which is important to forecast when you are preparing your business plan; you need to know your break-even point, what your profit levels are going to be and what impact different scenarios are going to have on your business in the future.

Our forecasting tool offers all of this functionality and much more. It is your one-stop-shop for helping you to prepare a robust and reliable business plan.

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