Cash Flow Forecasts

[Sahana]

Hi There

I'm currently writing my business plan for a coffee shop in central London and I'm finding it really difficult.

I have no idea how to do the Financial part of the plan, cash flow forecasts, P&L etc. What do I need to do to get started with this?

Is it worth paying an accountant to do this for me or should I persevere?

Any advice is much appreciated!

[eazytax]

Hello

To get started you need to first bear in mind that they are only forecasts - i.e they are an estimated best guess of the position. So don't worry too much about gettting it wrong. You also need to decide if its going to be a monthly, yearly or other period forecast.

Second to do the P&L forecast you need to first take a guess at what your sales are going to be during the first period (month, year or whatever). You can then apply a % growth to the figures each period. This % could be based on gut instinct, or any data you have to hand.

You then need to work out your direct costs which go underneath your sales on the P&L. These will be a % of sales. One way of getting at this would be to think how much you would charge for a cup of coffee and then to work out how much this cup of coffee would cost you to make it.

You would need to include a cost for the materials (i.e milk, coffee, sugar, water) plus a cost of the wages needed to serve it etc. If you then divide the cost by the sale value this will give you an idea the % you could use. But you would also need to factor in the sales of other items like snacks and the % you would make on each of those to give you a better idea.

You would then take the % you worked out and multiple it by your sales figure in the first period to give you the first periods direct costs. Then simply apply your sales growth % to this figure for each future period to give the costs in those periods.

The overheads are the next item, this is simply all the costs that you will incur that are necessary but not tied directly to how much you sell (eg rates, phone bills, rent, legal fees, advetising etc). You would need to estimate these each.

You need to make a list of all the assumptions you have made in arriving at the figures (how you arrived at %'s and how you have used thenm) and make sure that you record it all in notes to the forecast.

That gives you an idea about the P&L forecast, is that of any use?

Let us know if you need any further assistance, our website address is on our profile page.

Regards

Eazytax

[eequals]

Sahana take a look at the link in my sig below. This should have the answer to your problem:

Joe

[tkessex]

I would suggest visiting your local library and taking out a couple of books on business, and business planning. They'll show you what you need to produce, how you arrive at certain figures and how to go about putting it all together.

Business Studies by Ian Marcouse, Andrew Gillespie, Barry Martin, Malcolm Surridge and Nancy Wall (published by Hodder & Stoughton) is used in many colleges and offers a decent starting point for anyone looking to start their own business.

[Peter Bowen]

Originally Posted by eazytax

To get started you need to first bear in mind that they are only forecasts - i.e they are an estimated best guess of the position. So don't worry too much about gettting it wrong. You also need to decide if its going to be a monthly, yearly or other period forecast.

I think you should be very worried about getting it wrong - running out of cash will sink even a profitable business.

Doing a cash flow projection is an excellent part of planning your business and you should be doing these frequently once you're up and running.

Your income will be mostly cash so that makes it a little easier.

There must be hundreds of templates available or you can set up a spreadsheet that does the number crunching but the format is less important than the exercise - it can tell you tons about the business you're planning.

I'd suggest that you run it weekly for the first year and if things are reasonably consistent after that then extend the period. By that time you may also be able to get your suppliers on 30 days which makes it easier to batch payments.