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Cash Flow Charts
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Cash Flow Charts
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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 >
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* 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.
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* It also show an Opening Balance > and a Closing Balance >
** Lets look then at how we produce our chart
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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
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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
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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>
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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>
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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
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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
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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
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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
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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.
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Produced by Gates MacBain Associates ©
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