To make sure your organisation doesn’t run out of money during the year, you need to break down the budget and forecast cash flow month-by-month.Like the budget, the cash flow forecast is a prediction of what will happen, and in order to be of use, it needs to be prepared before the beginning of the financial year for which it is intended.
Keep the same headings as in the budget and allocate income and expenditure to the appropriate month. For many of the headings, such as staff salaries or rent, this may be a simple case of dividing by 12, since the amount will be the same each month.
However, this will not be true in every case. For example:
- Grants are often received in instalments
- Telephone bills usually arrive every three months
- Your organisation may be more active in the summer months and less in winter
- There may be end of year costs associated with the preparing of independently examined accounts and annual reports.
The forecast allows your organisation to identify and plan for any possible cash flow problems.
This page is a summary of the information contained in the full online toolkit.
