## Forecasting Beginning Cash Balance

CASH AT THE BEGINNING OF THE MONTH

Recall from Budget 11, entitled, "Determining All Cash Investments into Your Company", that the only cash investment made into Murray's company will come from Murray himself. Moreover, he decided to take \$7,500 from his personal savings account and invest it into the business (IE into the businesses' checking account). As a result, Scholarship Information Services will have \$7,500 in its bank account on July 1, 200X (Murray's first day in business). The \$7,500 can be seen under the "July" column in the chart below.

 JULY AUG. SEPT. OCT. NOV. DEC. Cash at the Beginning of Month \$ 7,500 \$ 2,237 \$10,056 \$18,690 \$17,060 \$12,767

The remaining amounts appearing in the "Cash at the Beginning of the Month" (August through December, 200X) simply refer to the PRIOR month's Forecasted Ending Cash balance. In other words, your Forecasted Ending Cash balance ALWAYS becomes your Beginning Cash for the following month. Therefore, Murray's July 31 Forecasted Ending Cash of \$2,237, becomes his August 1 Beginning Cash. Murray's August 31 Forecasted Ending Cash of \$10,056, becomes his September 1 Beginning Cash. And so on... Think of it this way, a company's Ending Cash will be used in the next month to pay bills, to purchase equipment, to pay taxes, to pay dividends, etc.

Below illustrates Murray's 200Y Forecasted "Cash at the Beginning of the Month" (IE from January 1, 200Y to July 31 200Y).

 JAN FEB. MAR APR MAY JUN. JULY Cash at the Beginning of Month \$10,373 \$14,069 \$17,850 \$20,293 \$20,440 \$21,071 \$18,390

The same principals apply in 200Y. Moreover, Murray's Forecasted Ending Cash on December 31, 200X (\$10,373), will become his Forecasted Beginning Cash on January 1, 200Y (\$10,373). And his Forecasted Ending Cash on January 31, 200Y (\$14,069), will become his Forecasted Beginning Cash on February 1, 200Y (\$14,069). And so on...

In summary, if you want to know where the "Cash at the Beginning of the Month" comes from, simply refer to each month's PRIOR Forecasted Ending Cash Balance.

Categories: Forecasting