Financial Guide for SMEs - SME Corporation Malaysia

Financial Guide for SMEsStep 3: Other Cash InflowsTo complete the cash infl ow information in the cash fl ow forecast, you will needto identify any additional cash coming into the business. Of course, the types ofcash infl ows for each business will vary, but the following list may help you torecognise other cash infl ows in your business:• Additional equity contribution;• Income tax refunds;• Grants;• Loan proceeds;• Other income sources not included in sales (e.g. royalties, franchise andlicense fees); and• Proceeds from sale of assets.If you are preparing a cash fl ow forecast for additional fi nancing, do not forgetto include the loan funds in your infl ows.Step 4: Cash OutflowsAs we have indicated earlier, one of the major inputs into the forecast is sales.Coupled with this infl ow is the cost of purchasing or manufacturing those goodsto sell. Therefore, when determining your cash outfl ows, it is suggested for youto calculate the cost of goods sold in line with your sales forecast. By doing this,if you need to change your sales numbers, an automatic change to the cost ofgoods sold fi gure should occur. Many computer programmes will allow you toset up a link between two items, such as your sales and cost of goods sold, tomake the process of forecasting easier. The calculation of cost of goods soldwas discussed in Chapter 1, so you may want to refer back to the section or usethe gross margin percentage discussed in Chapter 4 when estimating the costof goods sold for your forecast.ExpensesExpenses are those cash outfl ows relating to the operations of the businessand those that are not included in the cost of goods calculation. These are oftenreferred to as ”administration” or ”operational” expenditure. Again, the itemsof expense will depend on the type of business you are starting or currentlyoperating. One of the important areas to focus on when forecasting expensesis the classifi cation. Remember in Chapter 4, the difference between fi xed andvariable expenses was discussed. When putting together your forecast, thevariable expenses will be directly related to the forecast sales numbers. So ifyou adjust your sales, these expenses will need to be amended in line with thesales adjustment. Of course, the fi xed expenses will remain the same, althoughyou may need to consider adjusting these for increases (e.g. infl ation).75Chapter 6 p66-78 Eng.indd 758/15/11 5:02:25 PM