Cash flow forecast software with opening balance

Cash flow forecast software with opening balance (Easy opening balances)

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How do you calculate the opening balance in a cash flow forecast?

If your business is looking to prepare cash flow forecasts and you need to include opening balances, you’ll be looking for cash flow forecast software with an opening balance feature. Let’s take a look at this in more detail…

Cash flow forecast software with opening balance in 15 seconds…

Cash flow forecast software with opening balances is the same as a car with wheels. In other words, a car without wheels isn’t a car and neither is software without an opening balance feature cash flow forecasting software. If you’re a business with accounting periods before the beginning of the cash flow forecast period, you will have opening balances. At the very least you’ll have a starting bank balance to bring forward. But more than likely you will have opening balances of amounts owed to your business by customers and amounts owed by your business to suppliers. Then there’s opening stock, loans and fixed assets and depreciation to consider.

Cash flow forecast software with opening balance

Cash flow forecast software with opening balance

The opening balances you need for your cash flow forecast isn’t only about your opening cash at bank balance. Unless you are looking to prepare a simple cash flow forecast.

With a simple cash flow forecast, you’ll effectively be ignoring all the other opening balances. But instead, you’ll enter just amounts that affect the cash flows as they happen. Which is instead of worrying about an opening balance sheet. But I would argue that all sound cash flow forecasts should begin with and opening balance sheet and end with a projected balance sheet.

On the basis that you’re not looking for a simple cash flow forecast, you will need to know what opening balances might affect your forecasts. Plus how do you calculate the opening balances for a cash flow forecast? Let’s look at this question first.

How do you calculate the opening balance for a cash flow forecast?

How you calculate your opening balances for your cash flow forecast is relatively straight forward. Put simply, your opening balances are taken from your accounting system. They are the closing balances at the end of the last accounting period.

But this assumes you have up to date management accounts. But on the assumption that you do have up to date management accounts, your cash flow opening balances are the closing balances from your latest accounts.

What opening balances to include in your cash flow forecast in addition to your cash at bank balance

On the assumption you’re looking to prepare a more in-depth cash flow forecast, the following opening balances need to be included:

Fixed asset opening balances

Your fixed asset opening balances include the total cost of each type of asset your business has together with the accumulated depreciation on each fixed asset.

Your fixed assets might include property, motor vehicles, plant, equipment and fixtures and fittings.

Whilst the opening fixed assets themselves may not impact on the cash flows, unless you intend to purchase further assets, they are included as part of the opening balance sheet.

However, the depreciation on your fixed assets will be included on your forecast profit and loss account.

Opening stock

If your business carries stock, this is one of the opening balance figures you’ll need to bring forward into your forecasts.

Stock is important to include in cash flow forecasting, as the timing of stock buying has an impact on your cash flows. The opening stock will be what makes up your opening sales for your cash flow forecasts.

For example, if you have significant stock at the beginning of your cash flow forecast period, you may not need to make an purchases in the first month or so of the forecast.

Trade debtors or amounts owed by customers

If your business offers a credit facility to your customers (i.e. time to pay your invoices), it will mean that at any point in time there will be an amounting owing by your customers. The amount owed by your customers at the start of your cash flows needs to be include in your opening balances, they the money will be received from your customers during the cash flow period.

Trade creditors or amounts owed to your suppliers

If you receive credit terms with your suppliers, this will mean at the start of your cash flow period you will have amounts owed to suppliers. These amounts need to be taken account of at the beginning of your cash flow period, as they will be paid during the cash flow period.

Opening loans and hire purchase balances

What you owe are the start of your cash flow period needs to be brought forward. This is because the loan or hire purchase repayments will form part of your cash flows. Also, the interest charges will be included in your forecast profit and loss.

But now to cash flow forecast software with opening balances that does all of the above.

Cash flow forecast software with opening balances

If you want to go the easy rout and invest in cash flow forecast software with an opening balance feature, most good cash flow forecasting software should automatically include opening balances.

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