Financial Forecasting

There are several different approaches that could be taken to forecasting. The most common one is to produce a cashflow forecast

What is it?

A cashflow forecast is a statement of when cash is coming into the business and when cash is flowing out of the business.

When payments for childcare are received they are classified as cash received by the business and when bills like rent and wages are paid, cash is taken from the business. The cashflow forecast details when all monetary transactions occur, whether money is coming into or out of the business.

What does it do?

Regular update and review of a cashflow forecast allows managers to make sure that the business always has enough money at the right time to pay bills. Many businesses fail not because they are not profitable but because they do not have enough available cash.

The cashflow forecast aims to give accurate figures of exactly when money is received and spent by the business so that managers can always see what the anticipated cash balance may be at any point in the future.

By looking ahead at the exact timings of when ‘money comes in’ and ‘money goes out’, managers can plan ahead in case the forecast shows that the business may run out of cash. It’s possible to take action like re-scheduling bill payments or increasing revenues to avoid any future cash deficits.

How regularly should it be used?

Cash movements within your childcare business happen daily, fees from parents, rent payments, bill payments, money for consumables and petty cash, so because the picture changes rapidly its necessary to review cashflow frequently. It’s recommended that you review your cashflow situation on a weekly basis as it takes very little time.

Once your cashflow format is set up it’s a quick and easy task to update it regularly when changes occur such as changes in the anticipated numbers of children or a change in fee rates. As the cash moves in and out of your business, make changes to your cashflow forecast.

As with all functions within the business, to make sure your cash is managed properly you need to delegate the action to one person. This person should be responsible for maintaining your cashflow forecast.

In order to try to make this as accurate as possible it may be necessary to get additional information for example numbers of children in the area. This information may be available from your development team at sure start, or via the county website, www.dorsetforyou.gov.uk

See market research section

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Also in this Section:

Cashflow

Contingencies

Banks

Paper Trail

Handling Cash

Reporting

Financial Forecasting

Budgets

Funding

Tax/VAT

Fees Income

Documents:

Cashflow Template

Example Cashflow Forecast

Five easy ways to make money

Information on Childcare Vouchers (WORD)

Information on Childcare Vouchers (WORKS)

Tips on Funding