#Immediacy on speech making

Similarly, with the items of expenditure you will know when the items ...

Similarly, with the items of expenditure you will know when the items probably must be paid in practice. If some items are paid weekly ie wages watch for the five-week months and adjust the payments accordingly. Deducting expenditure from income gives the cash-flow balance for each month and whether this is positive or negative.

Study any months which are negative to see if you can make the balance positive by, for example, cutting out or deferring expenditure or spreading it over a longer period.

You may also be able to speed up some payments due to you, but the scope for this is usually pretty limited.

After you have done all you can in this way, calculate the revised balances for each month. These figures refer only to the business and must be corrected for what you draw out of the business for living expenses or, alternatively, what you plough into the business from external sources. If you take out a sum each month as drawings, you must enter this now on the cash-flow forecast.

If it is a fixed sum there is no problem, but if it fluctuates you must estimate it as best you can if you supplement the business with cash, either continuously or intermittently, this too must be estimated and entered on the sheet. Finally, you should enter, for the appropriate month, any special items of income or expenditure which you can foresee, eg grants or subsidies, tax bills, vehicle replacement, etc. Add up the new total for each month and, as you do so, check that all the positives and negatives are correct, both for individual items and in adding up the total.

Some of these monthly totals maybe negative, but this is of little importance as long as the balance at the beginning of the month is big enough to absorb it. Put down your estimate of the opening balance at the beginning of month 1 and add or subtract as appropriate the net total of month 1 to produce a closing balance for that month. For month 2; add or subtract the total for that month to the closing balance for month 1 to produce the closing balance for month 2. Continue this for the rest of the twelve months. Financial prospects Examination of the monthly closing balances will tell you a lot about your business and its prospects over the next twelve months: If they fluctuate, sometimes positive, sometimes negative, but with a fairly trend, then your business is static but you need more working capital .The biggest deficit which occurs will give you a rough idea of the amount needed If the balances are positive except for one or perhaps two negative months, then your working capital is adequate most of the time but there are one or two tight spots.

Make another attempt to smooth them by postponing or spreading out expenditure. If this fails to do the trick, you may need to arrange a short-term loan or overdraft to tide you over the next sticky period.

You'll probably find that showing these calculations to your bank manager will impress him / her and help you to get the loan. If your balances fluctuate, with a level trend, but always comfortably positive, then your business is static but you probably have too much working capital. You can afford to withdraw some working capital and invest it where it will earn interest.

Alternatively, you can either invest it in fixed assets, which will reduce your costs, or leave it as working capital and step up the scale of your business.

If your balances show a steadily increasing positive trend, even if they fluctuate, then you are in that most desirable situation you have positive cash flow.

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