Budgets and cashflows Return to Application resources

It is critical that you include operating figures and a cashflow forecast in your business plan.

It is also important that your organisation understands that budgets and cashflows are very different things:

Budgets seek to give an overall picture of the levels of income and expenditure that are expected over the year. They do not seek to reflect the actual timing of money that flows into and out of your organisation.

Cashflows aim to ensure that your organisation will have enough money in the bank to allow it to pay for all the goods and services it may need throughout the year. As well as reflecting the actual timing of money moving in and out of the organisation, cashflows also take into account the money available at the start of the year and give a figure for the money that will be available to your organisation at the end of the year.

Many organisations go bankrupt each year because, although they had a full ‘order book’, they did not have enough cash available to pay their bills. We want to work with you to ensure that this doesn’t happen to your organisation.

Budgets

Your budget needs to list the sources from which you anticipate receiving income during the year and the expenditure you will need to make. The figures should show:

• Annual estimates for the current financial year and the three following years, submitted as a spreadsheet to allow us to undertake financial modelling on the figures submitted
• A separate, more detailed, budget should cover the income and expenditure for the Futurebuilders project
• Any assumptions you have used in the creation of these spreadsheets
• Don’t guess what you will spend on salaries, utilities etc – look at what you have paid previously, or what other people are paying for similar posts

This section should also include:

• Other staff costs if they are relevant
• An allowance for inflation each year – this will affect the costs of employing staff as well as many other items of expenditure. It is unrealistic to expect to pay the same year-on-year – and your staff may be unlikely to continue to work without an increase in their salaries
• Include all the costs of running your organisation – from rent to rates and from the cost of supplies to utility bills

Cashflows

Your cashflows need to show the actual cash position of your organisation and should, again, be submitted in spreadsheet format. This needs to show month-by-month figures for the remainder of your current financial year and the subsequent 12 months, projected on an annual basis for two more years after that.

Ideally we would like to see you commenting on three overall financial scenarios:

1. A realistic projection of your organisation’s development
2. A worst case (where you show the effect of any ‘uncertain’ sources of income failing to be secured)
3. A best case (where income might exceed your realistic projection)

We would expect that this work will also help you in assessing the risks for your organisation – and what you will do if they need to be addressed.

• It is nearly always easier to construct your budget first and then build your cashflow from that; once you know how much you need to raise or spend then you can think about when it is likely to arrive or leave
• You must include both opening and closing cash balances in your cashflow – since a cashflow seeks to reflect the amount of cash in your business, you must know how much you started, and will finish, the year with
• The opening balance (the amount of cash your organisation had prior to the start of the cashflow) must link either to the figure in your last set of audited accounts or to the last set of management accounts produced in your organisation. In this way we can be sure that the amount of ‘cash’ shown in your organisation is accurate

Futurebuilders investment figures

If you decide to include the Futurebuilders figures in your budget then you should use an estimate of 6% as your rate of interest on any Futurebuilders’ loan as a single line entitled ‘Futurebuilders’ Investment’ without splitting it into grant and loan element.

Business plan guidance

For for guidance on how to write a business plan, read our Business plan guide.