I am working on cash flow projections for a new business. What is the process to come up with these numbers?

1. Your cash flow projections should be done by month for the first 12 months.
2. They should start with the beginning cash balance in month 1 and should end each month with the projected cash balance.
3. In addition to your revenue and expense assumptions (I have a few tips for you on these later in this email), be sure to include investment in inventory, property, leasehold improvements, debt service, etc. This is critical so your projections include everything you will be using cash for as you get the business up and running.
4. Be careful not to be too optimistic with your projections. It takes a while for a new business to get up and running and creating revenue.

One of the secrets to creating reliable projections for a new business is to talk to as many other people as possible who own and operate a similar business. You can contact business owners in other cities who will not be worried about you competing with them.

Then have a set of questions written out to ask them about all aspects of running their business and all aspects of their financial results.

Some people will provide lots of information for you. Others will only provide a little. But you will likely find this to be one of the most important parts of your work to create reliable cash flow projections.

Philip Campbell

Finance & Capital Expert