"Never take your eyes off the cashflow because it's the lifeblood of business" - Sir Richard Branson
If you are in business, financial projections can be difficult to get your head around but yet, they are really important in showing that a business can be successful and sustainable in the longer term.
This article aims to help you prepare realistic Cashflow projections for your business and to support your loan application.
The easiest way of looking at Cashflow projections is to simply ask yourself this question - Will my business income (turnover) cover my business outgoings (expenditure)?
So what should be included as Turnover:
Turnover is your cash inflows, - that is all the ways in which your business is going to generate cash.
So this will include all of your sales - can be broken down to cash sales and credit sales. Credit sales are sales that you will receive the money for at a later stage.
If you are applying for a loan from Microfinance Ireland, the loan amount that you are applying for should also be included as income as it is going to inject money into the business.
Now let's look at Business Expenditure:
Business expenditure are all of the items that cost you money to make your business successful.
Be sure to include everything from bills, overheads (e.g rent, rates etc), wages, raw materials, travel costs, advertising, packaging etc.
If you are applying for a Microfinance Ireland loan and you have already included the full loan amount under Turnover, then the loan repayments should be included under Expenditure as a regular outgoing of the business.
You should also put the purchases that you are going to make with the loan amount under Expenditure e.g. van €8,000, fit-out €12,000 etc.
Calculate your loan repayments with our handy loan calculator here:
If your business is registered for VAT, you must charge the applicable rate of VAT on any services you provide, or products you sell.
VAT should be included as turnover in the month you receive it and under expenditure in the month that you make your VAT payment to Revenue
Check out the Revenue website to see if you should be registered and charge VAT on your products and/or services
We have developed a standard Cashflow Projection template that you can use to prepare a simple Cashflow for your business.
Once you input the figures for each month under Turnover (Income) and Expenditure (Outgoings), the calculations will be done automatically.
We Have given a number of examples for both Turnover and Expenditure but Not all headings will be relevant for every business so you can change /update them as you go.
(Download Available Below)
First, you should calculate the level of cash that your business will generate (usually from sales) each month. If you are just starting out, this can be difficult as you have no previous record to base your decision.
Our advice is 'Take a conservative view and be realistic' taking into account that the business might not generate any cash in the first few months of trading.
Ultimately, you will need to show that you can generate sufficient turnover to cover your costs, outgoings and also cover your loan repayments
If the business is more established, use your records from previous years (financial/management accounts) to help you estimate how much income your business generates on a monthly basis.
Click on the button below to download our simple Cashflow Projection Template
Microfinance Ireland aims to provide information and support tools to help your business be successful.