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Forecast is similar to budgets. Unlike Budgets, Forecasts are based on past experience; whereas budgets are based on active plans for the future. |
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For example, you may create forecasts for: |
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Forecast sales |
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Forecast expenses |
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Forecast Profit and Loss etc. |
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Cash Flow forecast |
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A cash flow forecast is an estimate of your future cash in and out of the business based on experience. It is likely you will like to have an idea of the money likely to flow into and out of your bank account in a given period. |
For example
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You make sales of £2,500 and purchase stock of £2,500 every month. Your running costs e.g. electricity, gas is £1,000 per month. On the back of this information, the cashflow of your business is set out in the chart below. |
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Cashflow |
January |
February |
March |
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£000 |
£000 |
£000 |
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Receipits |
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Sales revenue |
2,500 |
2,500 |
2,500 |
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Payments |
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Purchaces of stock |
1,250 |
1,250 |
1,250 |
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Running costs |
1,000 |
1,000 |
1,000 |
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Total Payments |
2,250 |
2,250 |
2,250 |
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Opening bank balance at |
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Start of month |
1,000 |
1,250 |
1,500 |
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Add total receipts |
2,500 |
2,500 |
2,500 |
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Minus Total Payments |
2,250 |
2,250 |
2,250 |
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Banks Balance at end of month |
1,250 |
1,500 |
1,750 |
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Results
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Your forecast bank balances at the end of the month for January shows £1,250, February £1,500 and March £1,750. |
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Using this information, you are able to |
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Plan expansion of your business, |
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Purchase of a fixed asset, |
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Introduction of new products and services, |
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Recruitment of additional staff, |
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Move to new premises or |
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Increase marketing activity. |
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How we can help?
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At Accountancy Champs with our experience and knowledge, we can assist you with putting together a plan to monitor your forecast e.g. cashflow. Get in touch by either calling us or using the get a quote form. |
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We offer service packages such as forecasts service package (which covers Forecasting) to meet your budget or individual needs. |
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