A short-term cash flow projection should be used to manage your cash on a daily, weekly or monthly basis. This is just as important for a large business as it is a small business. You will want to put any cash that you don't need immediately in a money market or short-term deposit account so that it can be earning interest. However, since these accounts have withdrawal restrictions and penalties for early withdrawal, you will need to estimate the amount of cash you need to have easily accessible to meet your daily obligations.
To prepare a short-term cash flow projection, you take your checking account balance, add the cash you expect to receive in the time period, and subtract cash you have to payout during the same time period.
For a new business, preparing a cash flow projection can be challenging because you don't yet know the sales patterns for your business and start-up costs can be one time events that need to be included in cash planning, but won't be a regular part of your cash flow. It is important to get good cash planning habits established when you are starting a business. You just need to be aware that your methods will most likely evolve as you become more aware of the general flow of your business operations and allow plenty of latitude for unexpected cash obligations in the first few months of operation.
Short-term Cash Flow Projection Worksheet
| Description | From _________ To _________ |
From _________ To _________ |
| Checking Balance at the Beginning of the Period | ||
| + Estimated Cash Sales | ||
| + Estimated Collections on Credit Sales | ||
| + Transfers from Savings/MM/DA | ||
| + Other Sources _________ | ||
| + Borrowing Anticipated | ||
| Total Cash Available | ||
| - Bills to be paid | ||
| - Loan Payments (Principal and Interest) | ||
| - Payroll Tax or Income Tax Deposits | ||
| - Transfers to Savings/MM/DA | ||
| - Other Payments | ||
| Estimated Checking Balance at the End of the Period |
Instructional Notes:
From _________ To _________
Enter the dates for the projection time period. You should start with the current date so that
you have an accurate cash balance. You may want to prepare a projection in daily, weekly or monthly increments.
The short-term projection is typically used for up to 3 months, with weekly being the most frequently
used timeframe for small businesses.
Checking Balance at the Beginning of the Period.
Start with the current balance in your checking account as shown on your books. Don't use
the last balance on your bank statement as it may not contain all the activity that you have recorded.
+ Estimated Cash Sales
Include only the cash sales that will occur during the time period. If all or the majority of your
sales are via trade credit, leave this line blank.
+ Estimated Collections on Credit Sales
Include collections on accounts receivable, collections on credit cards. Do not include sales that are
expected to be purchased on credit during this time, unless they will also be converted to cash during
the same time period. This may be a little challenging for the new business owner, but with experience,
you will have learn how long it takes to collect your credit sales.
+ Transfers from Savings/MM/DA
Include any savings, money market or other deposit accounts that will mature and be transferred into your
checking account during the period. You may want to leave this line blank for the first draft. Once you have
prepared the initial worksheet, you can plug in the amount that you need to transfer from your investment
account to cover your cash needs and leave a comfortable balance in your checking account.
+ Other Sources
Other sources might include interest paid, refunds, deposits, or other miscellaneous cash receipts.
You would also include any capital from shareholders or partners.
+ Borrowing Anticipated
Enter the proceeds of any loans that you expect to close during the time period. You should also use this
line to estimate the amount of funds that you will need to draw on a line of credit or working capital loan.
Like transfers, you may want to leave this line blank for the first worksheet draft and enter it after you
tally the other figures.
Total Cash Available
The sum of your current checking account balance plus all cash inflows during the period.
- Bills to be Paid
Use your accounts payable aging to help estimate the total of the bills that are due in
the corresponding time period. If you don't have an accounts payable system setup, sort
through the bills to be paid, file and sort them by date, adding up the totals by time period.
Even if you do have an accounts payable system, it is a good idea to setup a filing system to
organize your bills by due date. That way they are all in one place when it is time to write checks
- Loan Payments (Principal and Interest)
Subtract any loan payments that are due during the time period of the cash flow projection.
Include both principal and interest on the cash flow projection as a use of cash.
- Payroll Tax or Income Tax Deposits
Many small business fail to make timely payroll tax deposits because the aren't managing their cash
flow and they don't have adequate cash available to make the deposit. As the owner of the business or
officer of the company, you are personally liable for payroll tax deposits. If they are not paid, you
can find yourself in serious trouble. The IRS can even place a lien on your home. For this reason,
it is wise to set up a separate line item on your short-term cash flow projection just for tax deposits.
Don't forget your estimated state and federal income tax deposits. Consult accountant if you need help
with this estimate.
- Transfers to Savings/MM/DA
Include any excess cash amounts that you transfer into an investment account. You may want to leave
this line blank for the first draft. Once you have prepared the initial worksheet, you can calculate this amount.
- Other Payments
Include any miscellaneous payments such as security deposits, insurance premiums due or other items not
included in your bills to be paid. You can also include any partners' draws or dividend payments.
Estimated checking balance at the end of the period.
This is the estimated ending balance -- the net of all the cash activity you expect during the period.
It should be a comfortable amount. If it is too large or negative, you may need to revise your Transfers
and proceeds from loans.
