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Prepare a cash flow budget

Develop or revise your budget for the business

On this page

  • Determine the time frame for cash flow
  • Estimate sales units
  • Estimate timing of income
  • Itemise and add expenditure
  • Calculate the surplus or deficit for each time period
  • Review sales units, timing of sales income and expenditure
  • Finalise the budget

When a crisis event first hits your business, an important step is to develop or revise your budget. The cash flow budget estimates the future income and expenditure of the business, revealing any periods where it may fall short of cash.

By developing cash flow projections for several months in advance, you can estimate when the business will be short of money and take appropriate steps beforehand, such as promotions or revising staff allocations. The cash flow budget is also the most commonly requested budget when seeking finance from a bank or another financier.

Irrespective of the nature and duration of the tourism emergency, it is recommended that you prepare, and continue to monitor, an emergency management cash flow budget.

Using the Cash budget template (XLS 19.5 KB)XLS icon template or Cash budget template - accessible version (DOC 99.5 KB)DOC icon, follow these steps to prepare an emergency management cash flow budget.

Step 1: Determine the time frame

Decide on the timeframe that the emergency might have a significant impact on your cash flow. This might be a weekly, fortnight, month or longer.

Step 2: Estimate sales units

Estimate the number of customers or sales units you could expect for a weekly, fortnightly or monthly forecast period. Do this for each of your areas of income, for example, meals, tours, accommodation or equipment hire.

Use the Estimates to assist with cash flow budget (PDF 23.21 KB)PDF icon to assist you with this step.

Step 3: Estimate sales income

Multiply the customers or sales units by the actual (or average) price of each unit, to give the likely sales income.

Step 4: Estimate timing of income

Calculate when this sales income will actually be paid to the business's account, taking into account any deposits, cash payments or credit card payments.

Step 5: Itemise and add expenditure

Identify and add up all the expenses that must be paid in each weekly, fortnightly or monthly forecast period. Separate the expenditure into fixed costs (those that will occur regardless of your situation) and variable costs (those that are linked to the number of sales).

Step 6: Work out surplus or deficit  

Calculate the surplus or deficit for the weekly, fortnightly or monthly forecast period. If there is a deficit, consider whether it can be covered by any cash you have on hand, or by an overdraft or other credit facilities.

Step 7: Review sales units

Review the number of sales units. Is there enough time to establish marketing strategies to increase sales with special offers or add-ons? Add in any extra units you could expect to sell, and recalculate Steps 2-6 above.

Operator feedback: Mountain Grand Guesthouse, Halls Gap

"It's important to keep advertising your business after a crisis. Don't stop marketing just because your cash flow is impaired." Don Calvert, Mountain Grand Guesthouse, Halls Gap

Step 8: Review timing of sales income

Review when the sales income is likely to be received into the business. Are there any opportunities to increase income during the emergency projection period by paying incentives for cash payments, or by temporarily reducing the normal payment terms? Add in any changes to the timing of when income is to be received and recalculate Steps 4-6 above.

Step 9: Review expenditure

Look at each expense item and ask whether any expenses could be deferred, reduced or avoided altogether without impacting on your business's reputation or future sales.

The separated fixed and variable costs will make it easier to look for potential savings because the fixed costs will tend to be relatively constant amounts, paid at regular intervals irrespective of sales income, while the variable cost will be linked to the sales income for the period.

Deduct any changes to expenses and recalculate Steps 5-6 above.

Step 10: Finalise the budget  

When a satisfactory and manageable result is obtained, finalise and print out the budget.  

Case Study: Loch Sport Marina Hotel (Gippsland)

The Loch Sport Marina Hotel experienced a downturn after the 2006-07 bushfires in Gippsland, followed by floods in June 2007 and a blue-green algae outbreak in the summer of 2007-08.

"While business is sound and going through good times, put in place financial arrangements to help you in the case of an emergency." says Alan Hall, Loch Sport Marina Hotel. "Don't wait until the emergency has struck and then go begging to the bank for money. Set up overdrafts, etc. when your business is in a positive growth cycle. This way you'll get a much more satisfactory arrangement."