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Potential lenders will review your statement to gauge your historical cash flow position and how it’s tracked over time.
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However, if your outgoings for the period exceed the amount of cash you have coming in, or the timing of the cash exiting and entering is not in synch, then you’re experiencing a cash flow problem. If your business is generating more cash than it is spending, then you are in a cash flow positive situation. Your cash flow statement can inform your cash flow position.For that you’ll need a cash flow statement.īut how is this different to your cash flow forecast? Just as your bank statement tells you the state of your finances over previous months, your cash flow statement records the cash that has entered and exited your business over the past month, quarter, or year.īy comparing your opening and closing balance you’ll be able to see how much cash your business is generating and how it’s moving in (via sales, dividends, investments, etc.) and out of your business (payroll, loan repayments, bills, etc.).
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Just as planning for the future is critically important, you also need to review past performance. By reconciling these two numbers (extract expenditures from cash revenues) you’ll have some assumptions to play with. Your cash flow forecast should contain your estimated cash revenues for a time period (the ones that you collect, not credit) and your cash expenditures per month. If you’re seeking funding, your lender will want to see your forecast to determine your future ability to repay the loan. If you foresee a cash deficit, this may impinge on your ability to fund marketing and growth, and pay the employees who help you achieve success.