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please try to make it clear as we all can understand and apply it as well.
To predict future trend of business on the basis of last year's actual cashflow or budgetted cash flow. It is difficult to forecast cash flow and take a reliable decesion as all the factors relating to the business might not exist. It also may vary from nature of business and the time of business.
So there is best practice to prepare forecast cash flow to identify the fixed portion that doesn't vary from year to year and for all others transactions plus or minus certain percentage considering inflation and proper justifications.
My2 bits :
Forecasting cash flow is actually shows how your busniness is expected to perform in next few years. It accounts the expected revenue the business is going to produce, the cost ( financial cost, CAPEX, and working capital ) its going to incurr and finally profit its going to make in next few financial years.
Forecasting cashflow also allows to evaluate company's present value based on how its going to perform in the future.
From my Point of veiw we can make it in excel sheet which contains the3 items :
1) All the company balances as avaliable balances and not Ledger from All company Banks
As opening balance , meaning to make begning by the cash the company have in all banks.
2) Make report from AR sections (( Collections Status )) meaning to know what are the excpacted
Money to be collected from Customer in short or Long terms to know our revenue when we collect it.
3) Make report from AP sections (( AP Aging )) meaning to know what the company need to be , all the
Laiblities need to be paid and set as Urgent and Important , meaning which supplier MUST be paid
And which can be pending for period of time without makeing cut off supply from them.
By gathering all the above , you can know what cash you have now (( Banks )) and what can be collected (( AR / Collections )) and which need to be paid (( AP Aging )) in order to know your physical status of your company any time you need to take the accurate call on time need.
it means to try to analyze the predictabale cash in and cash out <and put your budget depending on it
