Finamcial Management

How do you prepare a Pro-Forma Cash Flow Statement?

In this section, you will move step-by-step through the process of preparing a pro-
forma cash flow statement. You will be using the following three spreadsheet forms
in this process:

1. Projected Cash and Accounts Receivable


2. Projected Accounts Payable


3. Pro-Forma Cash Flow Statement

To simplify the illustration, the example used will be the format used for a fee-for-
service business. That is a business where
revenue is not derived from the sale of
products but rather is generated from fees
for work performed.

Examples of people in this type of

business are:

Lawyers

Accountants

In these businesses, total sales revenue is Health professionals
derived from the services provided to the
customers/clients.

Security services

Consultant

In a business selling products, deduct the
cost of the product and all the directly
related expenses from the selling price in
order to determine the net revenue or income derived from sales.

Personnel services

Real Estate

Delivery service

In other words, in a business selling products Net Sales Revenue is the

selling price less the Cost of Goods Sold. The details of doing this

calculation are demonstrated on the Income Statement of the business. We

will not be dealing with the Income Statement in this section.

A Pro-Forma Cash Flow Statement (Cash Flow Statement) is only concerned

with the net cash receipts and expenditures of the business.