What is a Cash Flow Projection?

Cash flow projections help businesses determine what their future sales will be. These projections help business owners build their capital budgets, determine which areas of their businesses need immediate attention to improve, and see what resources they will need in order to meet the future demands. Cash flow forecasts are typically used to plan for the management of long-term debts. In addition to cash flows, many businesses use capital budgets to estimate the amount of money that will be spent on buying equipment, expanding existing business facilities, and buying new business equipment such as additional computers and printers. These are all parts of the “capital budgeting” process. For advice from Accountants Cheltenham, visit a site like Randall & Payne, a firm of Accountants Cheltenham.

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Cash flow projections can also be used by banks and other lending institutions when they are working out a loan for a small business. Cash flow projections can provide a base level of confidence for the lending institutions that the owner of the business has enough financial capability to repay the loan. If the numbers do not look good for the bank, they may not be willing to lend the money.

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When planning a financing plan for your business, it is important to first look at your cash balance. Your cash balance is a measurement of the current assets of your business and represents the current value of all of your debt. Cash flow projections will take current account balances into account so you will know what your monthly cash balance will be when you apply for the financing that you need.


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