Cash Flow Statement
There are two types of cash flow documents that need comprising on a monthly basis. The first document is the ‘Cash Flow Forecast’. The forecast is your estimate of your cash income and expenditure over a period of time: usually twelve monthly forecasts per year (but can also be of great help when completed on a quarterly basis with the monthly version).
The second type of cash flow document is a ‘Cash Flow Statement’. The statement records your actual cash income and expenditure at the end of the ‘forecast’ period. The closer these two documents are, in financial terms, the more understanding and control you have over your business.
Note: Only cash is involved in the forecast and statement. Sales on credit do not form a part of these documents until you receive the actual cash. If you allow 30 days credit you would enter the payment on next months forecast, and only on next months statement if you receive the payment.
Cash Flow Statement
Cash Flow Statement for December 2002
| £ | £ | |
|---|---|---|
| 1) Opening Balance of Cash | 120,000 | |
| 2) Add | ||
| Receipts from client/customer | 80,000 | |
| Investment income | 500 | |
| Bank Account Interest | 35 | |
| 3) Total Receipts | 80,500 | |
| 4) TOTAL CASH | 200,500 | |
| 5) Less Payments | ||
| Stock / Services | 40,500 | |
| Expenses | 4,000 | |
| Wages / Salaries | 6,000 | |
| Interest | 500 | |
| Tax | 900 | |
| 6) TOTAL PAYMENTS | 51,900 | |
| 7) CLOSING BALANCE OF CASH (4 – 6) | 148,600 |
Cash Flow Statement for December 2002
| £ | £ | |
|---|---|---|
| 1) Opening Balance of Cash | 148,600 | |
As you can see, the statement is simple and informative. All of the required figures can be obtained easily. The figure for next months opening balance (1 above) is the closing balance of this month (7 above). If you do not have a figure to start with, add together the cash you hold and your bank balance – if your bank account is overdrawn, just add a minus to your figures.
Negative balances are usually displayed in brackets as follows:
Example, for £500 overdrawn, you would record it (500)
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