It systematically breaks down revenue and expense items by recording cash that will be taken in and paid out. It records only payments and receipts. Your cash flow statement will account for the increase or decrease in the cash of your business. Your forecast should also be revised if your sales or expenses, time frame for collections or your business plans change significantly. Cash outlays for goods and other variable costs are determined by sales volume, inventory levels and payment terms.
Intermittent costs are important expenses often overlooked as cash outlays.
They include loan payments, insurance premiums, purchase of equipment or machinery, travel expenses, major trips, training costs, and special projects. Your cash flow statement should be prepared on a monthly basis for the first year, quarterly for the second year, and annually thereafter. The following is an example of an annual forecasted cash flow statement. The final statements you must prepare are the balance sheets for the first three years of your business. These balance sheets will show the assets, liabilities and retained earnings you expect your business to have at the end of each year of operation.