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By Jim Gante, CPA
Small Business Manager

The Definition of Cash Flow

A cash flow statement provides a summary of a company's financial health. Cash flow equals cash receipts minus cash payments over a given period of time; or equivalently, net profit plus amounts charged off for depreciation, depletion, and amortization.
A projected cash flow statement lays out a prediction of your company's available funds over six months, a year, or whatever period of time you choose. The objective is to determine whether your business will have enough cash to pay the bills. It also clues you in - ahead of time - whether it will be necessary to arrange alternative sources of funding.

Lenders want to see a professionally prepared cash flow statement before making loan decisions. Based on the information on a statement, you might be able to establish a line of credit for use for emergency expenses or during dips in your business cycle.

As you know, a statement of cash flow reports the money coming into and out of your business (see right-hand box for the definition). A projected cash flow statement is a prediction of the same for the future.

If you want a projected statement for an existing business, predictions can be made based on history, as well as any budgeted changes, such as future price increases.

A projected cash flow statement for a start-up business involves a comprehensive list of budgeted expenses that includes a conservative estimate of revenues. Make sure your budget includes overlooked expenses incurred in the start-up process such as professional fees, licensing, incorporation costs and security deposits. We have the skills necessary to prepare statements of cash flow for businesses like yours and we would be pleased to meet with your lender to review this information.

Almost all businesses experience ups and downs when it comes to cash flow. A key to your organization's longevity is advance preparation for the downturns, as well as wise stewardship of the upturns.

We can prepare a projected statement of cash flow that helps steer you toward success. Contact our Small Business Manager, Jim Gante, CPA for more information.
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