Sometimes organic funding is not enough for a small business and looking at external finance is a natural next step.  There can be varied reasons for the extra cash flow requirement: from organisational growth to the purchase of new equipment or additional stock or simply to fund a particular project.   Regardless of the reason, there is one report that trumps all others in importance and should be prepared and ready for use: The Cash Flow Forecast. 


Why is Cash Flow Analysis Important?

  • The Cash Flow Forecast details when you expect to receive income and pay your expenditure.  A well prepared forecast may include seasonal factors such as purchase of stock leading up to increased sales periods and then include the income derived from the sales in the following months.
  • It will highlight how you manage your debtors and show that you have an effective collection process.  For example, if your terms are 30 days then you can use the cash flow analysis to prove you will receive the funds on time.  A lending organisation could be reluctant to lend you funds if you receive payment well after the 30 days, as a poor collection process can result in poor liquidity.
  • Payment of your creditors occurs in line with your payment guidelines.  Showing that you make payments on time will raise the level of confidence with the lending organisation that you are likely to make their repayments on time.  Cashflow forecasting software like Calxa will automatically estimate your creditor payments based on your average outstanding creditor days.
  • The cash flow forecast should detail income you expect to receive from investments such as bank interest or dividend from shares.  This can highlight that you manage your funds efficiently and even though you may be seeking additional funds these investments can indicate that you have an extra level of security for the funds you are seeking.
  • Having your cash flow forecast linked to your strategic or operational plan also highlights to the lending organisation that you have a clear vision and direction for the organisation and how you plan to achieve these objectives.


Offering cash flow information to your bank during your negotiations will emphasise how well you know your business and what you have planned.  This not only creates a very high level of confidence in you from the lending organisation but may also result in your ability to negotiate a better deal with lower borrowing costs or other obligations connected to any loan.

Providing a Profit & Loss budget and a Balance Sheet forecast with the cash flow forecast shows good financial practice and demonstrates to the finance institution that you have taken the necessary steps in managing their risk.

Traditionally these reports are very complex and time consuming to prepare, taking many hours and advanced spreadsheet skills. In the past most businesses would have asked their accountant to do this work but this is no longer always necessary. Calxa makes the process quick and easy and enables business owners to have a more informed discussion with their accountant.