Five Components of Murray's 200X Forecasted Cash Flow Statement:

1. THE HEADING
The heading is an extremely important part of the Cash Flow Statement. It communicates to the reader the name of the company, the type of statement that will follow (in this case, the statement will be the forecasted cash flow statement), and the date or range of months the statement pertains to.

SCHOLARSHIP INFORMATION SERVICES
FORECASTED CASH FLOW STATEMENT
From JULY 1, 200X to DECEMBER 31, 200X

2. THE ASSUMPTIONS
The Assumptions section basically sets the tone for the Cash Flow Statement. It highlights various pieces of data or information used to develop the Forecasted Cash Flow Statement. As a result, readers can better understand and comprehend the numbers and values presented throughout the statement. Below illustrates Murray's 200X Assumptions:

Please Note: some business plan writers do NOT include an Assumptions Section as part of their Forecasted Cash Flow Statement. In this case, the business plan writer simply places their Cash-Flow Statement Assumptions under the Appendices Section of their Business Plan.

3. CASH INFLOWS
The third component of Murray's Forecasted Cash Flow Statement is Cash Inflows. Cash Inflows represent the cash coming into a company. More importantly, cash inflows predicts when (which months) money will enter the business. Examples of possible cash inflows include; sales from customers, bank loans, loans from family members for business use only, government grants, government loans, cash invested into the business by its owners, and interest earned on the businesses' cash in the bank. Below illustrates Murray's Forecasted Cash Inflows from July through to December 31, 200X:

As you can see, Murray anticipates $26,220 will enter the company in July, 200X - resulting from sales of $18,720, and from a personal cash investment of $7,500. And so on...

4. CASH OUTFLOWS
Cash Outflows, also referred to as Cash Disbursements, represent the cash leaving a company for payment on bills/expenses, for equipment purchases, for withdraws, or for paying dividends. More importantly, however, cash outflows predicts when (which month) money will leave the company. Examples of cash outflows include, cash for advertising, rent, utilities, business registration, telephone, bank & service charges, wages & salaries, employer costs, correspondence materials, office supplies, income taxes, owner's cash drawings, purchases of equipment, dividends paid to shareholders, and the list goes on and on. The general rule of thumb is that all expenses appearing on the income statement (except for depreciation expenses), office equipment purchases, income taxes, drawings by owners, and dividends paid to shareholders are all considered cash outflows. Below illustrates Murray's Cash Outflows from July to December 31, 200X.

As you can see, Murray anticipates $23,983 cash will be needed in July for paying corporate bills, purchasing office equipment, and for owner withdraws. In August, $16,102 in cash is expected to "leave" the company, and so on.. Note: deprecation expenses are NEVER considered a cash outflow. Moreover, cash does not leave the company to pay depreciation - it is a non-cash expense.

5. ENDING CASH BALANCE
The ending cash balance is calculated by subtracting the "Total Cash Outflows" FROM the "Total Cash Inflows". Below illustrates Murray's Forecasted Ending Cash from July to December 31, 200X.

As you can see, Murray is forecasting to have $2,237 in his bank account AT THE END OF July, 200X. On August 31, 200X, he is forecasting to have $10,056 in his bank account, and so on. Notice that all of Murray' ending cash balances are positive. This means that he is forecasting to have money in his bank account each month during the six month period (July to December). If in any month, however, the ending cash balance was negative, then Murray would require some sort of financing for that month. The financing might include a loan from the bank, a loan from a family member, a government loan or grant, etc. For more information on how to account for negative ending cash balances, please refer to the section entitled "The Cash Flow Statement".

ONE FINAL NOTE ON THE ENDING CASH BALANCE:

Your 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.

Your Cash Flow statement must account for the transition of ending cash to beginning cash. This transition can be seen in Murray's "Cash Inflow" section of his forecasted cash flow statement; labeled "Cash at Beginning of Month" - shown below.

As you can see, the Cash at the beginning of July simply refers to Murray's personal cash investment into the company. The Cash at the beginning of the August, however, represents Murray's forecasted ending cash balance in July. The cash at the beginning of September refers Murray's forecasted ending cash balance in August, and so on... When developing your Forecasted Cash Flow Statement(s), be sure to account for this transition of ending cash to beginning cash.