A cash flow forecast is an estimate of the amount of money you expect to flow in and out of your charity and includes all your projected income and expenses. A forecast usually covers the next 12 months, however it can also cover a short-term period such as a week or month.
The most important reason for a cash flow forecast is to make sure that the charity can afford to pay suppliers and employees. Suppliers who don’t get paid will soon stop supplying the charity – it is even worse if employees are not paid on time.
A cash flow forecast can help you:
plan out how much income you expect to have this year
plan how much you expect to spend in costs
understand when cash will come into your bank account and leave it
Armed with this knowledge, you will be well placed to make important decisions about your charity. Here are some questions that a cash flow forecast can help you answer:
Could you offer a new service?
Could you start providing services in a different location?
Can you afford to employ new members of staff?
Should you outsource some of your day-to-day tasks?
If you need more space for your charity, can you afford to rent an office rather than working at home?
Are you at risk of running out of cash? Should you look at borrowing money?
If you require further help with this subject, please contact us here