Essential to any application for funding is the cash flow. A cash flow statement is an projection of how the project or business works in financial terms, to demonstrate you have enough working capital to deliver the project or survive in business – picture the amount flowing in the bank account month by month.
When preparing a cash flow statement, be sure what it is you are being asked to produce – a cash flow for the project only or for the business, and for the exact time period (normally 12 months, or the lifetime of the project!) If it is a project cash flow, you will need to look back to any milestones or key stages or dates that you’ve put in the application, work out when expenditure will be and ensure the cash flow reflects this.
The cash flow will show the opening balance, closing balance, income including who else is making a financial contribution and any projected sales and expenditure. This is usually detailed in table format, often on a spreadsheet.
By setting the figures down on paper, you will be able to see where any issues arise eg when expenditure exceeds income. You will then be able to take corrective action (eg short term loan until grant payment arrives).
You may need to do more than one version, an ‘optimistic, pessimistic and a realistic’ version depending on the funder – this is where the technology can come in helpful. It is much easier to introduce ‘what if’ scenarios, ie if sales increase by 10% rather than 5%, grant is less than expected, without having to manually recalculate all the figures!
Profit and Loss statements are different, as this is the trading position of the business (also known as income statement, earnings statement, operating statement) – and you may also need to complete sales forecasts to complete the financial sections.