Cashflow Forecasting – planning income and expenditure

Introduction

Historically, cashflow forecasting was a method used by business owners, managers and accountants to analyse income and expenditure over a set period of time. By analysing inflows and outflows of cash for each period, e.g. each month, they were able to see what strains they would have on cash at any one time – e.g. was there any particular month or months where they needed to draw on other sources of cash.

Similarly, the use of a spreadsheet allowed the business manager to perform a number of “what if” scenarios – “what if” price increased 10%, “what if” this loan was repaid early.

Cashflow Forecasts and Personal Financial Planning

These same principles can be applied to your own personal finances. We all tend to have the same regular inflows and outflows of cash – e.g. if you’re in a salaried position then your net take home pay will tend to be the same each and every month. It is the irregular payments that can cause problems, for example car insurance premiums paid on an annual basis, payment for holidays etc.

By entering your expected income and expenditure each month into a spreadsheet it is possible to see the monthly flows of cash that you expect to occur.

The spreadsheet which accompanies this article contains most areas the typical family might find in terms of income and expenditure.

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Download the cashflow forecast spreadsheet -

Excel 2003 version – cashflow_forecast.xls

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