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2 year cash flow forecast

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  • 2 year cash flow forecast

    I am currently working with a client who is a start up R&D company. They have just spun off from a very large well know international company, and for the last 6 months have had all bills paid by their parent company and then reimbursing the parent company for cost as part of the spin out agreement while they established credit with vendors. In additional they have been funded each QTR by the parent company as they are not currently marketing the devices they are working on developing. Both of these situations will be phased out starting this year, but that means there is no AR or AP history in QB to review or utilize in QB cash flow projections report. The owner wants a 2 year cash forecast prepared that will encompass the changes the company will be facing as it moves forward, e.g., vamping up inventory in preparation of sales beginning in QTR 3 this year, anticipating working capital borrowing, bringing on investors, etc. The cash flow projection in QB will only forecast out 6 weeks and is based mostly on the existing AR and AP. This won't meet the needs for a 2 year projection. I am preparing a 2 year forecast template in excel but the president wants to know if there are any other companies that have done this and how they are incorporating the information from QB to do it. Has anyone done this before or is currently doing so? Any examples, suggestions or help on how this was/is done would be appreciated. Thank you!

  • #2
    I think an Excel spreadsheet may come closer to giving what the president what he wants.

    Just remember, where there is little or no history of transactions, perhaps the best that one can hope for it a guess. In other words, if the historical data is inadequate to show trends, one may have a case of GIGO with one's projections.

    Last edited by Lorin Browning; 02-07-2020, 01:11 PM.
    Lorin Browning, Ph. D.
    Fellow -- National Tax Practice Institute


    • #3
      It is not possible to show the transactions such that they happened from the R&D company if the parent company did it on behalf of the R&D company.
      As you explained that you are creating a forecast template on Excel.l I think that is the right way to go.