Developing a Financial Plan (Part 2)

In Part 2 of this four part series on developing your financial plan, we discuss the cash flow forecast.

Please note: The information in the article is for informative purposes only and is not financial advice. You should seek appropriate independent professional advice before making any decisions based on material found on this website or any linked sites.

A Statement of Cash Flows (or Cash Flow Statement) shows the movement in the Cash account of a business. It presents cash inflows (receipts) and outflows (payments) in the three activities of business;

1. Operating,

2. Investing,

3. Financing.

This differs to profit and loss, as the profit and loss record income when generated (invoice sent to the customer) and expenses when incurred (not when paid). The profit and loss does not record cash inflows from financing activities nor outflows concerning loan repayments.


Completing a cash flow forecast for at least 12 months will enable you to take into consideration different factors such as payments received, seasonal adjustments, holiday periods and significant
expenses or capital outlay throughout the year. It allows you to see in advance when you may need to be careful with business expenditure throughout the year to avoid facing cash flow issues and
requiring additional funding to keep afloat.

Cash Inflows include receipt of fees for your services, can sometimes include re-licensing fees for images, referral fees, or proceeds from a loan. Cash outflows include payment of expenses, disbursements involved in operating the business, and repayment of loans.

When booking a job or project, remember that it could take up to a month or more to receive the funds depending on your agreed payment terms between your business and the client. This is one
typical difference between a profit and loss statement and cash flow statement; income generated in month one may not be received until month two or three. Learn more about accounts payable and accounts receivable here.

Always bear in mind that real estate photography can be quite seasonal, so you need to plan accordingly. Reduce expenses in the months where the volume of bookings is anticipated to be low and allow for increased expenses in the months after the slow period. As detailed above, you will receive payments in the first month of the slow period (from the previous month’s bookings), however, you will also have reduced inflow of payments into the month proceeding a quiet period depending on your payment terms.

If you have significant expenses due each year such as vehicle registration, new equipment purchases or marketing and advertising campaigns that involve a significant financial investment, you should try to position these around periods of high cash inflow to ensure you have enough money to cover this expense but also the regular expenses and cost of sales.


Cash allows your business to survive and prosper and is considered the primary indicator of your business’ status. It is important to remember that businesses can survive for some time without sales or profits, but without cash, it will die. To be able to trade effectively and grow your real estate photography business, you must build up cash reserves that will ensure that the timing of cash movements will put you in an overall positive cash flow situation.

Preparing a cash flow projection is one of the most critical elements of financial and business planning. The process allows you to identify potential problems you may be encountering and modify your business practices accordingly to avoid financial problems.

If you haven’t already done so in the part one of this series, download The Financial Plan Template.

Note: This article is an extract from the resources on the Education page on this website.

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