Be Proactive! Get Ahead on Your Cash Flow Projections

We are approaching a more stable Main Street economy in mid-2021, but every business owner must plan for the unknowns they may face in 2022. Fortunately, your business has survived and now you want to see it thrive.

As you look back over your profit and loss statements for the past year and a half, you may see that your revenues hit new lows in 2020 and may have spiked in 2021 as a result of short-term demands. Your payroll expenses may have been inconsistent as a result of the scarcity of manpower or the temporary support provided by the PPP loan program. You have done whatever was possible to handle the unexpected crisis, and now you have to examine your options for the future. Responding to financial catastrophes after they occur is a thousand times harder than planning for the possibility that they may occur. When faced with uncertainties, if you are proactive, you are taking charge and planning for the future.  If you are reactive, you are merely trying to survive.

A Proactive Plan

A proactive plan, in business lingo, is a strategic plan.  The first step in preparing a strategic business plan is to write down a paragraph or two addressing both short-term and long-term objectives. The next step is to convert the verbiage into a financial schedule that reflects the costs related to your objectives, and the expected revenues and operating costs. The outcome will result in cash flow projections that will take the business into the upcoming year with positive options for tomorrow’s success.

The conversion from words to numbers is the step that often blocks realistic planning. Perhaps your bookkeeper, or your accountant or a financial advisor can assist you in the conversion from words to financial projections.  Or, if you are familiar with Excel software, you can learn how to prepare projections for 2022 and all future years. There are instructional materials available on the internet to assist you with the process.

First, you must determine if you are you preparing the projections for internal use or planning to seek capital from a third party, either a lender or an investor.  It is my recommendation that you prepare the projections for internal use and, at a later date, revise the projections to meet the needs of the intended reader. Most small business owners overlook the need to address a specific audience.  It is an important consideration. This first set of projections for internal use only can be adjusted to reflect both best case and worse case scenarios. The final version that you prepare for internal use should be conservative, allowing you to make the necessary adjustments periodically. Hopefully, the conservative pro-forma will show a breakeven after 4 to 5 months.

It is recommended that the first year of the pro-forma be prepared as 12 monthly schedules. Both the revenue and the operating expenses should reflect seasonal changes. I also recommend that a page of assumptions be prepared to clarify all items that might be questionable, i.e., changes in cost of goods or payroll which may be a result of the pandemic.

You can simplify the formatting of the cash flow projections by using either the line items in a previous tax return or the line items of your internal profit and loss statement.  Be consistent.  Do not change the line items. You can add additional line items for new sources of revenue and additional expenses. The page of assumptions should clarify any questions a reader might have.

The preparation of realistic cash flow projections will allow you to evaluate what sales will be required to break even and how much revenue is required to match all your operating expenses, including a disbursement to the owners. The first year is the most important year. The following years—not less than a total of three years—should reflect realistic anticipated changes as the company grows. Years two and three can be shown as yearly totals.

The first attempt at cash flow preparation is a chore, but in 2022 it is a necessary one because you cannot evaluate what changes may be required in your business operation until you review these financials.  Be wise. Be prepared. Be proactive.


Related content:

Best Practices for Conducting Productive Meetings

Popular Bank and Latin Biz Today Talk Small Business Capital Infusions and Emergency Funding [Video]

Tips for Small Business Owners On Contacting Your Members of Congress



Discovering Balance and Bliss: Embracing Yoga

Discovering Balance and Bliss: Embracing Yoga

With Yoga as a steadfast companion, the pursuit of balance, bliss, and well-being becomes an invigorating and enriching voyage Finding moments of tranquility and inner harmony is a precious gift. Enter yoga – an ancient practice that extends far beyond the realms of...

The Use of Philosophy to Build a Mental Fortress [Video]

The Use of Philosophy to Build a Mental Fortress [Video]

Stoicism teaches that before you try to control events, start with learning to control yourself. Editor’s note: This is part six of a six part Emotional Intelligence Series. Please find Part 1: It’s Never too Late to Create a Bold Self-help Plan & Execute It  ,...

Mindfulness in the Workplace- A Strategy, Not Trend

Mindfulness in the Workplace- A Strategy, Not Trend

The integration of mindfulness practices in the workplace is not just a trend; it's a strategic investment The world, technology and life overall seem to be moving at a faster pace than ever! Due to the amount of daily overstimulation, the concept of mindfulness has...

Video Gallery

Modern version of Stoic philosopher Epictetus
A professional leads a cybersecurity training session for employees, emphasizing best practices. The photography captures the engagement of participants, showcasing the educational aspect of safeguard
Hispanic bearded male businessman trainer teaching coaching new recruitment African American female businesswoman employee in formal suit sitting studying learning company graph chart strategy
The presence of a robot using a computer. Office keyboard being typed on by machine. future IT group,.
Latino Streetwear Entrepreneur Latin Biz Today
Chef Lorena Garcia cooking with a wok
Latina Chef Loren Garcia
Latin Biz Today partner Johanna at the San Sebastián Festival


Which item currently represents the greatest hurdle in the growth of your business?(Required)

Sign Up for the Latin Biz Today Newsletter

PR Newswire

Featured Authors

avatar for Juanita OlguinJuanita Olguin

Juanita is co-founder of Smarter Biography...

Being Yourself is the Most Powerful Thing You Can Be

Innovation & Strategy


Four Basic Principles for Raising Capital

Four Basic Principles for Raising Capital

Outside investors want to understand a business' strategy as well as its financial statements.   The need to raise capital from outside investors requires a great deal of preparation across multiple dimensions. Among many things, investors look to understand...









Work & Life


Health & Fitness

Travel & Destinations

Personal Blogs

Pin It on Pinterest