25. Proforma Cash Flow

By Roger Bryan

In a business plan, it is very important to create a pro-forma cash flow in order to calculate the inflow and the outflow of a business. This information will help the company understand if and when they need financial support to sustenance the business.

To build a pro-forma cash flow, you will need to have access to the following information:

With these, you will try to estimate the net change by subtracting sales and other receivables to cost of materials, operating expenses, taxes and other costs, and later summing the result to the starting cash. The net change will tell you the amount of cash you will have in the end of the period.

Starting cash – The cash the company has in the beginning of the period you’re analyzing.

Sales – This is a prediction of what the company will make selling the product. The best way to make this is to use the average of sales from the previous period of time and make the changes as you go (For example, if you believe the sales will raise for some reason)

Other receivables – Despite of sales, the company may have other sources of income.

Cost of materials – You also need to know how much the materials used in the fabrication of your product cost.

Operating expenses – Represents labor and machines, essentially.

Taxes – This is an estimative of what you will pay.

Other costs – The Company may have other sources of costs.

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