FINANCING - 24.02.2010

New Year, new funding

Cash flow forecasts. If you found yourself constantly having to delay paying suppliers or scraping around in order to meet your company’s working capital or cash requirement in 2009, you may want to consider providing the board with more than just a standard cash flow statement. Why not start the New Year with a “Funding Report 2010” for your MD?

Financial requirements. For example, your cash flow forecast shows external funding of £75,000 is required, which is first used in Month 3 of 2010, reaches a peak of £70,000 in Month 5 and is cleared by Month 9 (note that the full £75,000 doesn’t appear to be needed but it’s advisable to obtain more than is required to cover any unforeseen circumstances). However, your cash flow forecast doesn’t explain where this £75,000 is coming from. Based on your financial projections, a funding report could suggest how the £75,000 might be funded and how and when this funding could be repaid. A daunting prospect? It doesn’t have to be.

Tip 1. The easiest way to draft a report is to use a series of questions, the answers to which will automatically provide the format for your report. The key questions in a funding report will usually include:

• based on the maximum figure in your cash flow forecast, how much money the company needs and what it needs it for

• the finance options available to the company

• when the company will actually need these funds

• how and when could they be repaid

• what security, if any, is available as collateral for a loan.

Tip 2. Begin your report with a “Timetable on anticipated funding” with headings for “Requirement per cash flow forecast” which is fulfilled by columns for “Anticipated funding” from, say, share issue, cash introduced from directors, bank loan or HP loan.

For a free financing requirements worksheet (FC 02.04.01A) and a free funding report (FC 02.04.01B), visit http://financialcontroller.indicator.co.uk.