Cash Flow & Forecasting Services

Management of cash is a crucial part of any business. It becomes extremely important for a business entity to trace the flow of cash. There exist only two possibilities during a business transaction namely, cash inflow which represents the amount of cash flowing into the business and cash outflow which states the amount of cash moving out of the business hold. Multiple transactions take place every single day based on the inflow and outflow aspect. You might have heard a lot about the term 'cash-flow' is often used in the business world. Let’s understand what cash flow and its forecasting mean in business terms.

What is Cash Flow Statement?

Cash Flow Statement is a tool that states a clear picture of the movement of cash. It is an important document that completes the financial report set by an organization. The statement keeps a track and traces out the instances by cash flowing in and out of the organization for a specific duration and also shows the causes for the change of cash position over time, and accordingly, the movement of cash have been categorized into three segments:

01

Operating Activities

Cash activities related to the net income of business like cash paid, revenue earned from the sale of goods.

02

Investing Activities

Activities related to non-current assets like income earned through long-term investments, property, etc.

03

Financing Activities

Activities that bring a change in the size and composition of the owner’s capital like stock sales and repurchase, dividend payments, etc.

What is Cash Flow Forecast?

Cash Flow forecast or is an estimated amount that is expected to flow in-and-out of a business entity while carrying out daily business activities. The forecast generally covers a period of 12 months, but can also cover a short period say monthly, quarterly, half-yearly, etc.

Cash flow projections require two inputs:

1. Projected Income Statement

2. Projected Balance Sheet

Why Do We Need a Cash Flow Statement?

As mentioned above, Cash Flow Statements play a major role in defining the financial health of a business. Apart from that, we need a cash flow statement for the following purpose:

1. Legal Requirement

As per legal rule, it is essential for every medium and large organization to produce their cash flow statement as part of their yearly financial statements.

2. Determining Capital Structure

A track of proper fund flowing helps a business to determine the capital structure and properly deal with business risk.

3. Metric of Financial Health

Proper financial records help to keep a track on the financial move of the business and finally helps the business entity from becoming an insolvent.

4. Working Capital

A cash flow statement helps a business to determine the proper working capital required on a daily basis.

5. Valuation Purposes

Cash flow statements help and ease out the process of company valuation.

How to Prepare a Cash Flow Statement?

A cash flow statement can be prepared in two ways: Direct and Indirect.

1. Direct Method

This method includes all the individual instances either of cash is received or paid.

2. Indirect Method

Net income, depreciation, and other accounting items are used to arrive at the cash flow.

The International Accounting Standards Board (IASB) prefers the direct method of cash flow as it delivers clearer results compared to the indirect method.

Advantages of Cash Flow Forecasting

Till now we have got a clear idea of why cash flow statement is essential for a business organization. Now let’s have a look at the benefits that an organization can derive by preparing a cash flow statement:

  • Reflects the ins and outs of cash in an organization stating all the sources
  • Provides insight details about the company’s revenue over a period of one year
  • Comparison of company’s growth becomes easier
  • Helps the internal management to understand to estimate and set the financial policy
  • It helps in future cash planning
  • Helps the firm to identify the liquidity and profitability position
  • Analysis use these reports to understand the financial health of the business firm

JAXA Cash Flow Services

At JAXA, we aim at designing the best financial structure to deliver a high cash-flow framework system. We provide a wide range of services that include:

  • Daily cash-flow report maintenance
  • Credit card report conciliation
  • Cash flow budgeting
  • Managing electronic payments
  • Financial risk management
  • Maintaining the accounting records and database
  • Proper management of receivables and payables

Why Us?

We are a financial consultant in Dubai, and assure our clients in providing reputation building, maximizing the credibility, and standing out from their competitors. We hold ISO 9001-2008 certification, and follow the International Financial Reporting Standards (IFRS) to main the professionalism in our deliverables that made us one of the top audit firms in Dubai. Currently, we hold more than 750+ clients at a global count that includes multinationals, limited liability, offshore companies etc. At JAXA, we provide you the cash flow forecasts and projection reports satisfying your requirements and that will help your business to grow further.

FAQs

What is working capital?

The capital of a business which is used in its day-to-day trading operations, calculated as the current assets minus the current liabilities. is referred to as working capital.

What are cash and cash equivalents?

Cash and cash equivalents are company assets that are either cash or can be converted into cash immediately. Cash equivalents are short-term investment securities that possess high credit-quality and are highly liquid financial instruments.

What are the cash inflow activities under operating activities?

Cash inflow activities under operating activities include cash sale, cash received from debtors, commission and fees, royalty and other venues.

What are the cash outflow activities under operating activities?

Cash outflow activities under operating activities include cash purchases, payment to creditors, cash operating activities, payment of wages, and income tax.

What are the cash inflow activities under investing activities?

Cash inflow activities under investing activities include the sale of fixed assets and investments, interest and dividend received.

What are the cash outflow activities under investing activities?

Cash outflow activities under investing activities include the purchase of fixed assets and purchase of investments.

What are the cash inflow activities under financing activities?

Cash inflow activities under financing activities include the issue of shares and debentures, long and short-term borrowings.

What are the cash outflow activities under financing activities?

Cash outflow activities under financing activities include cash repayments of amounts borrowed, interest paid on loans and borrowings, dividends paid on equity, and preference share capital.