1. Cashflow Planning

2. Introduction During the planning process you will have: selected your chosen (outline) system assessed the plan in terms of resources required tested the plan for profit viability Now it is essential to test the plan for its effect on cash flow

3. Cashflow Planning You need to ensure that: The requirement for working capital via the overdraft can be properly assessed. Your chosen system shows a yearly cash surplus when the system is fully working. A cashflow budget is needed to cover 2-3 yrs.

4. Quarterly Cashflow Summary Q1Q2Q3Q4TOTAL BANK RECEIPTS 164,03356,319224,95840,248485,558 BANK PAYMENTS 110,129132,98576,63962,803382,556 SURPLUS/(DEFICIT) 53,904-76,666148,319-22,555103,002 OPENING BALANCE -228,000-174,096-250,762-102,443-228,000 CLOSING BALANCE -174,096-250762-102,443-124,998

5. Estimating Loan Payments Every £1000 borrowed over 5 yrs @ 5%6%7%8% Total annual payment231237244250 Average annual interest payment 31374450 Average annual capital repayment 200

6. The Cashflow Budget NB timing of receipts and payments when constructing the cash flow budget. The totals for the trading items in the cash flow can be taken directly from your gross margins and fixed costs shown in your profit budget. You can then go through each gross margin and the fixed costs, deciding when the different items of output and costs are likely to occur

7. The Cashflow Budget Implementing change can produce an overdraft or increased overdraft situation Interest will be charged and can be simply estimated The closing balance must be recalculated to include the interest payment

8. Overdraft Interest Calculation Month1Month2Month3 Opening Balance (£) -2000-5020-1015 Inital Closing Balance (£) (A) -5000-10003000 Average balance for the Month (£) = -2000-5000 2 = -5020-1000 2 = -1015+3000 2 Is there any interest charge? YES NO Annual Interest Rate (variable) 7%6%7% Interest calculation =3500* 7 1200 =3010* 6 1200 0 Monthly Overdraft Interest (£) (B) £20£15£0 Final Closing Balance (£) (A) – (B) -5020-10153000