ChApter 7 | YOUR CASH FLOW FORECAST AND CAPITAL SPENDING PLAN | 135
month. To get month two’s cumulative
net cash, add together month one’s
cumulative net cash (line 13) and month
two’s net cash (line 12). For month
three, add month two’s cumulative net
cash (line 13) to month three’s net cash
(line 12). Continue that process for the
entire 24 months. Remember that when
you add two negative numbers together,
you get a larger negative number—you
do not get a positive number.exAmple:
The M & M Copy Shop chart shows how
to accumulate these figures. Note how
the cumulative cash flow increases the
negative amount when each individual
month’s net cash flow is negative. Then,
when the individual monthly figures turn
positive, the cumulative negative figure
becomes smaller as the positive cash
flow reduces the cumulative negative
figure. Finally, in the fifth month, the
cumulative figure becomes a small
positive. This means that the fourth and
fifth months of positive cash flow have
offset the first three months of negative
cash flow.M & M Copy Shop Cash Flow Forecast
Cumulative Net Cash ($000s)1 2 3 4 5
Line 12:
Monthly Net Cash (2.5) (1.8)
(0.2) 1.9 3.9
Line 13:
Cumulative Net
Cash (2.5) (4.3) (4.5) (2.6) 1.3Required Investment for Your Business
This chapter’s objective is to develop the
amount of money you need to start or
expand your business. That amount of
money is the sum of two numbers:
• the total dollars you developed from
the Capital Spending Plan, and
• the largest negative figure you
developed on line 13 (Cumulative
Net Cash) of the monthly Cash Flow
Forecast.
Make this calculation for your business.
You’ll use this figure later, when you write
your plan summary and spell out your
need for funds to start or expand your
business.exAmple 1:
For the M & M Copy Shop, the maxi-
mum negative cash flow of $4,500 was
reached in the third month (assuming
that future individual monthly cash
flow figures continued to be positive
figures). That is the amount of working
capital that M & M Copy Shop needs to
begin operation. Mickey and Michele
add together the amount listed in their
Capital Spending Plan to $4,500 to
derive the amount of cash they need to
open their business.exAmple 2:
Antoinette’s Cash Flow Forecast
shows a positive cash flow from the
beginning because her sales revenue