Cash Flow Charts

Cash Flow Charts

Cash Flow A means of assessing the amount of money coming into and going out of a company over time Can be a Statement or a Forecast * A Cash flow is a means of assessing the amount of money coming into and going out of a company over a period of time. ** It can be a Statement or Forecast *** A statement uses historic data – that is information that it has on what has come in and gone out already **** A Forecast tries to predict what will come in and go out over a period of time such as the duration of the project ***** If you have played the video on Financial Management you will know what a cash flow will look like, let me show you one >

* You will notice that we have the months along the top > ** And the Items of Income > and Expenditure > at the side > These are totalled showing the total amount of income and expenditure for each month.

* It also show an Opening Balance > and a Closing Balance > ** Lets look then at how we produce our chart

April May June July Opening Balance Income Payment Total Expenditure Labour Materials Closing Balance *And we will keep it simple ** We will set up our chart. It is useful to produce these in a spreadsheet such as Excel as that then will enable any alteration to be calculated automatically, although they can be quite easily be drawn *** Start by putting in the months and then the items of income and expenditure and also the opening and closing balance * We can then insert the amounts for the first month. ** If we have allocated a certain amount of finance for the project we can insert that as the opening Balance

April May June July Opening Balance Income Payment Total Expenditure Income Payment Total Expenditure Labour 3000 Materials 5000 8000 Closing Balance * or, if we are working on overdraft then it will be a zero ** If we had any income we would add that *** Although in this case we don’t **** But we have got some expenditure so we would add that and total the expenditure for the month

April May June July Opening Balance Income Payment Total Expenditure Income Payment Total Expenditure Labour 3000 Materials 5000 8000 Closing Balance -8000 * We then insert the closing balance which is obtained by taking our opening balance > adding our total income > in this case nil, and subtracting our total expenditure > which will give us a negative of £8000 ** Our closing balance for this month becomes the opening balance for the next month>

April May June July Opening Balance -8000 Income Payment Total -8000 Income Payment Total Expenditure Labour 3000 Materials 5000 8000 Closing Balance * Our closing balance for this month becomes the opening balance for the next month>

April May June July Opening Balance -8000 Income Payment Total -8000 Income Payment Total Expenditure Labour 3000 Materials 5000 4000 8000 7000 Closing Balance -15000 We can then add the figures for this month and go through exactly the same process

April May June July Opening Balance -8000 -15000 -20500 Income Payment -8000 -15000 -20500 Income Payment Total Expenditure Labour 3000 Materials 5000 4000 2500 8000 7000 5500 Closing Balance * And repeat it for the subsequent months

April May June July Opening Balance -8000 -15000 -20500 Income Payment -8000 -15000 -20500 Income Payment 30000 Total Expenditure Labour 3000 1000 Materials 5000 4000 2500 8000 7000 5500 2000 Closing Balance 7500 * In this month we have had a payment so that is recorded ** The closing balance will then show the profit although as this is a simplified example no allowance is shown here for overheads, bank charges etc

April May June July Opening Balance -8000 -15000 -20500 Income Payment -8000 -15000 -20500 Income Payment 30000 Total Expenditure Labour 3000 1000 Materials 5000 4000 2500 8000 7000 5500 2000 Closing Balance 7500 Total * We can also use the cash flow to provide us with additional information by having a final column to total all the income and expenditure by item

April May June July Opening Balance -8000 -15000 -20500 Income Payment -8000 -15000 -20500 Income Payment 30000 Total Expenditure Labour 3000 1000 Materials 5000 4000 2500 8000 7000 5500 2000 Closing Balance 7500 Total 30000 10000 12500 22500 * We can therefore have a financial breakdown of the project with regard to how much has been spent on what. ** It also show us exactly what finance is required and will enable us to determine when the project will go into profit.

Produced by Gates MacBain Associates ©