Friend of mine (part time sole trader) has asked for some help producing cash flow forecasts for two years. She is applying for a grant so needs to show the grant money within those forecasts. The money should be issued in march this year but the forecasts are to go from April. Its difficult to predicat the cash in bank so would you leave the opening balance as nil just populate the predicted purchases / sales and show the change in balances?
If the normal bank balance is usually NIL, then shouldn't be too much of an issue. Depends upon what is due to happen between now and then.
It's rather ironic that you are doing forecasts from April onwards - 2 months and more away - but are having difficulty in doing the figures up to that point! I suppose it's easier to do 'back of an envelope' figures based on broad assumptions than to do accurate figures.
I am not acting as her accountant so am unable to produce accurate figures. All I am doing is looking at her purchasing/sales history (for the short period which she has been trading). The grant/training will help her increase her sales and Im looking at the effects her marketing/increased marketing training/future training will have you see. It may have seemed like a daft question and I am sorry for that but I'm used to dealing with accurance solid fugures "in my day job". I just wondered if anyone else had done this before and used the nil balance. Im probably concerned with it going beofre a grant approval board you see.
The sales figures will be a reasonable projection based on the true facts of her growing customer base.
If you're simply putting together some kind of forecast which will illustrate how the investments will help the business, it may be enough. The point I was making - I wasn't trying to have a go - was that your friend is putting forward a projection for April, may, June, etc.. - and as we know, the further you go forward, the less accurate the figures become - yet is effectively saying that one of the figures that makes up a cash flow - the opening bank balance - is not entered.
If I was on the panel, I would probably be saying "why can you forecast the figures for, say, April, but cannot forecast the opening bank balance at the beginning of April?" I suppose it depends upon whether they simply accept the OPINION that your friend is making that her bank balance will be NIL at the beginning of April.
It would perhaps be more complete to start with the bank balance as at today, then calculate what's going to be received and paid next week, then the same for the week after, etc.. until you get to the end of March - then you will have a bank balance at the beginning of April.
No your advice was gratefully received and to be honest I felt a bit stupid because after I read it I thought why am I worrying? Why not just get a hold of her bank statment and do the calculation myself and if shes is not forthcoming then she can do it herself. Simples as they say.
I appreciate you taking the trouble to comment and you are quite correct if I had a CFS with no opening balance that would concern me greatly. I think what she has experience is an over friendly third party who makes things out to be easy, in one of her email she even says "its easy" and forcasting cash flow for a projected two years is anything but that, especially in her line business (beauty) youcant exactly ring your client up and get them to commit for the next two years.
