Mocash: A Computer Spreadsheet for Projecting Monthly Cash Flows
LaDue, Eddy L.; Schuelke, Jacob; Mensah-Dartey, Virgil
This Excel worksheet is designed to assist in the development of monthly cash flow projections for the coming year (referred to as next year) based on the receipt and expense occurrences of the prior, or a base, year (referred to as this year). This is an historical base model, not a budget based model. Receipt and expense data for this year for the farm being projected must be available, broken down on a monthly basis for each category. Monthly cash flow projections for next year are an essential part of effective capital management in any business. They are used: (1) to develop a plan to avoid cash flow problems, (2) to plan for efficient use of capital, (3) to determine the operating, or line of credit, needs of the business for the year, (4) to identify expected term credit needs, and (5) as a basis for monitoring the business to identify issues that need management attention (management by exception). This program does not project cash flows. It provides the framework, does the arithmetic and transfers data from one worksheet to the next. A useful cash flow projection can be made only if considerable thought is given to the individual receipt and expense items and the expected operation of the business for next year. A cash flow projection that mindlessly changes each item by the planned change in herd size or acres will be of little value. Keep in mind that: (1) Budgeting is not an exact science and the idea is only to be in the ballpark with your projections of the coming year(s). Projected data will never exactly predict the future, but it should be close enough to provide a basis for management decisions and for evaluation of actual occurrences. (2) Miracles rarely occur. Do not to build large productivity changes or other unsubstantiated changes in the budget. The past performance of a business is usually a good predictor of the future. There is a cause for every financial result. Use causal logic in projecting cash flows. Think about what causes each expense and receipt item. See Table 1 for ideas.