134 | HOW TO WRITE A BUSINESS PLAN
replacement, so they won’t be covered
by the amounts you have written for
purchases resulting from your cost of
sales. Include those extra purchases
here.- Other Cash items. Here is where you
place any cash receipt or expenditure
that is not covered in the Profit and
Loss Forecast or elsewhere in your Cash
Flow Forecast. For example, perhaps
you anticipate an investment in your
business in a few months and you need
to show the positive cash infusion. Or
you might plan to buy a new piece of
equipment sometime down the road.
If your total is negative, make sure you
put brackets around it. Otherwise, your
Cash Flow Forecast will be incorrect. - Monthly Net Cash. Take a moment to
review your work to make sure you
have understood the cash flow effect of
each of the entries and that they are all
on the right lines. Make a final check to
be sure that any negative numbers have
brackets around them.
Then add and subtract the various
entries on the Cash Flow Forecast form
to derive the monthly net cash for
each of the 24 months. Positive cash
numbers represent additions to your
bank account, while negative cash
numbers represent money you’ll have
to add to the business. Remember that
numbers with brackets around them
are subtracted from the total and that
numbers without brackets are added to
the total.
If the monthly cash flow figure is a
negative figure, make sure you place
a bracket around it. Do that as you
complete each month’s calculations;
otherwise, you’ll forget which numbers
are positive and which are negative and
you’ll have to do all the arithmetic again.
Year Total. Add up each of the rows (lines
1 through 13). Enter the yearly totals
under the Year Total column. Check
your arithmetic by seeing if the total
monthly net cash figures add up to the
same figure as your yearly total. If your
answer is the same whether you add
vertically or horizontally, your math is
correct. If not, you’ve made a mistake
somewhere.CAUTiON
Don’t use line 13 to check your math.
It won’t work in the second and later years
because those years start with a previous
balance.- Cumulative Net Cash. This line shows
how the monthly negative or positive
monthly net cash numbers add across
to derive the total cash required for
working capital. Most businesses
will show several months of negative
cash flow followed by months of
positive cash flow. By adding the
monthly figures together, you’ll see the
maximum negative cash—that’s the
amount you’ll need for working capital.
For month one, simply copy the net
cash amount listed in line 12 for that