The next task at hand will be to tackle the Cash Flow Statement projections. Often overlooked, the Cash Flow Statement is critical for projecting out working capital needs to the Owner(s)/Management. Typically, most CPA’s and other financial professionals will use the indirect method or Statement of Changes.
Remember, the indirect method adds changes in working capital accounts to net income and non- cash expenses to arrive at Cash Flow from Operations. Capital accounts include current assets and current liabilities. Obviously, you will need to set up the Balance Sheet before you can create formulas that compute changes in current asset and current liability accounts.
The important thing is to get the format of the Cash Flow Statement projections right. Then you can go on to doing the same for the Balance Sheet projections. Afterwards, create the formulas for both.
Remember, you will need the change in cash from your Cash Flow Statement projections to arrive at your projections for the cash account on your Balance Sheet projections.
Formulas for individual cells will need to be created and referenced to the appropriate cells back in the Assumptions Worksheet.
As mentioned above, use the Income Statement and the Current Asset and Current Liability sections of the Balance Sheet to arrive at Cash Flow from Operations.
For the Cash Flow from Investing and Cash Flow from Financing portion of the Cash Flow Statement projections, be primarily concerned with expected changes in the non-current Asset, non-current Liability and Shareholders’ Equity portions of the Balance Sheet.
Know when payments on your company’s long-term debt will be paid in the fiscal year. In addition, know when you will make large capital expenditures. Also know when distributions to shareholders typically take place.
Don’t forget that these transactions will impact both the Balance Sheet and the Cash Flow Statement.