A cash flow projection for a bank loan is best reported with a forecast period of 12-months or more, but a 36-month cash flow projection with profit and loss, and balance sheets included is recommended. The cash flow projection must demonstrate the business will be profitable and cash-flow positive.
The two main types of cash flow forecast are the direct method used by treasury and cash managers to manage day to day cash and funding requirements vs the indirect method used by businesses to project future cash flows, projected balance sheets and profit and loss to plan and budget.
The main disadvantage to cash flow forecasts is the reliance on historic data to predict future cash flows for the business. You are also reliant on your best estimates of what will happen in the future, but these could be wrong.
Growing a small business without money is entirely possible. But growing a business by starting out with solutions that don’t cost any money at all, followed by solutions that require some investment is the safest and best way to approach the challenge.
Cash flow forecasting software with bank overdraft functionality makes it easy to prepare forecasts for your bank manager. If your business needs to prepare cash flow projections to forecast the level of overdraft required as part of your working capital requirement, then it’s important to find easy to use software to save you time and effort. Especially if you’re not used to preparing complicated spreadsheets with Excel or similar.
Cash flow software with interest expense functionality included will include on the cash flow forecast report itself and on the forecast profit and loss report. Additionally, the loans, hire purchase or overdrafts the interest expense relate will be included on the projected balance sheet. Interest expense will be generated from within the cash flow software from two sources. These include an automatic overdraft calculation from the cash flow if an overdraft is required. Plus from forecast interest on loans and hire purchase contracts over the projection period.