A cash flow projection template, also known as a cash flow forecast, is a set of financial statements that project the cash flow or the movement of cash in and out of your business, an organization, or even as an individual over a given period. Cash flow projections are often relevant for a 12-month budget or a multi-year business plan.

There are two ways to present cash flow projections in finance:

• Direct Cash Flow Method
• Indirect Cash Flow Method

The Direct Cash Flow Method starts the projections line by line and normally has the following structure:

• Revenues…
• Operating Expenses
• Capital Investment Required
• Financing Cash Flows etc.

The main advantage is that such cash flow projections are easy to do. The main disadvantage is that net working capital cash flows are often neglected. Therefore, to increase the quality of the cash flow projection, one needs to use the indirect cash flow method.

The Indirect Cash Flow Method starts by building a three-statement model (Income Statement, Balance Sheet, and Cash Flow Statement). It provides a complete picture since the resulting cash balance at year-end must reconcile with the positions in the Balance Sheet so that at the end:

The structure of the Cash Flow Statement then is as follows:

• Cash Flows from Operations
• Cash Flows from Investing Activities
• Cash Flows from Financing Activities

Both methods can be used to forecast cash flows, while the indirect method often shows higher quality. For our purposes, we focus on the indirect cash flow method by forecasting our business’s three statements: Income Statement, Balance Sheet, and Cash Flow Statement.

The Ideal Excel Template for Cash Flow Projection

An ideal Excel template for cash flow projection should explain in detail the expected movement in cash over the selected period and indicate why. 

They reflect all your likely revenue sources and compare these against likely business expenses. Creating a cash flow projection can be quite challenging, even for the most experienced entrepreneurs. This is because it demands an in-depth approach and includes a gamut of factors such as cash flow analysis, evaluation of liquidity and solvency, and identifying cash flow drivers, among other things. And this is where a cash flow projection comes into play. A cash flow projection template is vital as it influences business planning and budgeting and is handy in making important decisions.

Below, we look at how you can effectively use your cash flow projection template to create a 12-month business budget and a 3-year business plan. A 12-month cash flow projection template mostly serves budgeting purposes, while a minimum 3-year cash flow projection template is needed to create a longer-term financial plan. 

How to Use a Simple Cash Flow Projection Template for a 12-Months Budget

A 12-month Excel template for cash flow projection is crucial, especially if you’re just starting out. It is usually used when creating a business budget and focuses on all the cash flows that will happen for the next year. Surprises aren’t always that pleasant. Thus, it is essential to know what might happen in the future and prepare for certain circumstances that might negatively affect the business. A 12-month cash flow projection is also ideal for budgeting since it is short-term, and updating the plan won’t be too complex of a task. Basically, a 12-month cash flow projection is created to help the user better understand the business’s cash position during the year and prepare sufficient liquidity for the business in the future. 

The first step of developing your 12-month simple cash flow projection template is assessing your likely revenue and expenses for each month for a whole financial year. If you`ve been in business, you can use your previous sales history to evaluate your sales and expenses. 

If you`re just starting out, you can use the economic surveys to determine what you are likely to expect within your 12 months. Since sales do not always remain constant throughout the year, you should also factor in seasonal patterns and one-off events.

Finally, remember to factor in your future plans and changes in marketing trends and conditions. For instance, if you’re planning to launch a new product or add a new item to your inventory of sales products, you should expect a sales increment and factor this into your sales forecast.

Similarly, if a new competitor just entered your domain, you might want to drop your figures slightly because they may attract some of your clients.

How to Use an Excel Template for Cash Flow Projection for a Business Plan (3 years)

All the strategies and tactics of developing a winning business plan mean nothing if there’s not a solid financial plan. The financial aspect of any business plan is one of the most vital sections that determine whether your business is viable or not. It’s a key component in determining whether your startup is going to attract any investment in your business idea. A detailed operating model translates the assumptions in the projected income statement, balance sheet, and cash flow statement over a minimum of three years forecasting period. The 3-year Cash Flow Projection Template is the minimum required financial plan to build a business plan.

Essentially, the financial section of your business consists of three components including; the cash flow projection, the income statement, and the balance sheet. However, we shall focus on the importance and how to use a 3-year simple cash flow projection template for your business plan. It is especially useful when considering the theoretical “what-if” scenarios to simulate any change in assumptions on the forecasted cash flow over time. To compare scenarios, one can simply compare the resulting cash balance at the end of the forecast period and compare it to other scenario results.

When working on your Excel template for cash flow projection for your business plan, you should realize that it’s not the same as accounting for your budget. While accounting looks back in time, business planning has a forward-thinking approach, starting today and going into the future. 

A simple cash flow projection template for your business plan is vital if you’re seeking financiers since they want to see numbers that will grow your business. The biggest benefit, however, is that the plan allows you to understand how your business will do.

When filling your Excel template for cash flow projection, you should first consider filling in the start-up and operating expenses. These are expenses that you’ll incur before making any profits and include;

• Business registration
• Licensing and permits
• Rent deposits
• Upfront utility fee
• Salaries
• Loan repayments
• Distribution
• Promotion
• Office supplies and maintenance

This is just an example of what you should consider, and it varies depending on the type of business. Take this operating expense, multiply the expenses by 36, then add the start-up expenses, and you have a ballpark figure of 3-year complete expenses.

Wrap-Up

When choosing a perfect cash flow project template, you should choose one that is well-customized for your business. If you’re looking for the ideal cash projection templates that are designed with your business in mind, look no further than www.efinancialmodels.com business templates. These templates are well-designed for you and will surely provide results.

Leveraging a cash flow projection template from eFinancialModels.com can significantly enhance the financial planning and management processes for businesses of all sizes. These meticulously designed templates offer a robust framework for accurately forecasting cash inflows and outflows, enabling enterprises to anticipate future financial positions more precisely. By incorporating these templates into their financial planning strategies, companies can identify potential shortfalls and surpluses ahead of time, allowing for informed decision-making regarding investments, expenses, and funding requirements.