How to prepare a cash-flow forecast

The person responsible for marketing in our fictional student enterprise Pot Luck, Kate, has estimated that she will sell 60 bowls over 6 months.

  • After doing their research on pricing, Pot Luck decided on a selling price of 17.50 euro per bowl.
  • Kate has assumed that no sales will be made in September and that there will be an increase in sales in December because of the Christmas Trade Fair and again in February following on from increased promotion.
  • For September, they have decided to buy 6 bowls at a cost of 4 euro each and 4 tubes of paint at a cost of 7.50 euro. Robert, the Finance Manager, thinks that they will spend approximately 20 euro on getting business cards printed, 10 euro for promotional pens and another 5 euro on posters.
  • Estimation of expenditure on phone calls is estimated at 4.14 euro and 3.00 euro on travel per month.
  • Wages for Kate and Robert have been set at 75 euro each, taking into account their time working on the business.

So, based on these figures, the Cash-Flow Forecast for Pot Luck will look something like this:

This shows us that the total expenses for September are 79.67 euro, before any income is made from selling the bowls. This shows us the amount of money Pot Luck need to finance the start-up costs of their business.