Cash-flow plan / Liquidity plan

The cash-flow plan shows the flow of money, how much money our company has and what income and expenses will be in the future. The cash-flow plan is part of the financial plan, but it focuses on a narrower area, the change in the cash balance.

The cash-flow plan of our company is expected liquidity outlines its situation: it presents income and expenses for a given period in parallel. It typically applies to one year, since the cash-flow plan is a financial plan part, which is usually prepared broken down into years. The cash-flow plan is important because it allows you to see how much money is available to the company. 

The cash-flow (CF) can also be entered for the present, for this it is usually enough to look at the balance of the bank account and the cash register. More importantly, however, with the help of the cash-flow plan, there is a good chance that you can also estimate whether there will be, for example, something to cover a larger expense expected next month.  The cash-flow plan shows whether the money from a previous business will come in by then. 

With the help of the cash-flow plan, you can also see when it is expected that there will be no money to implement the plans. One at a start-up business it is also possible to track how long it is stable financing the starting capital. Of course, this requires us to estimate expected expenses and income as accurately as possible. Let's not let our hopes guide us when we enter the numbers in the table! 

One small enterprise in this case, the cash-flow plan is essentially an Excel table. In its simplest form, the columns of the table are the months ahead, preferably at least 12. The lines are the incomes first, then the expenses, namely itemized. The first line of each month is the opening balance, followed by the various incomes. The most important of the revenues is obviously the sales revenue, but of course money can also come into the company from other sources: we can get, for example interest from the bank for the capital held there. Then comes the summary line of income for each month.

The cost lines should be a with fixed costs start and create a summary line for these as well. This is necessary because when the income barely collateral the fixed expenses, you have to think hard about how to proceed. The variable costs rubric will be the most frequently updated part of the table, because there is always something that could not be calculated in advance. It is important to display only the costs associated with cash flow, that is amortisation for example, it is not part of the CF plan, as it does not involve cash flow. This is also the reason why it is always advisable to include some reserve for unexpected expenses in the cash-flow plan.

The CF plan must also include cash flows that do not appear as costs. This could be, for example, the repayment of a loan or the payment of the consideration for an investmentnt . 

The cash-flow plan can of course be prepared broken down into weeks or even days. This may be necessary when the cash-flow in the basic plan approaches zero or turns negative. In such cases, it is advisable to prepare a more detailed plan for the given period so that the company is not taken by surprise. For example, additional liabilities can be arranged in advance, fundraising about possibilities: this can be a factoring and of course the credit recording as well.