Preparing cashflow forecast ... help needed please.

[Ian1969]

Hi, first posting here,

Just starting to prepare my cashflow and profit / loss sheets for a business I'm planning to start in the next few months.

Am I correct in thinking this is how you treat equipment purchases when showing them in the CFF and PL sheets.

EG Vans £10k and machinery £8k

I have shown the purchases in month 1 at their full costs of £18k for the CFF and have shown just the depreciation in the PL sheet i.e £500 per month.

All help appreciated.

[taxattack]

Hi, first posting here,

Just starting to prepare my cashflow and profit / loss sheets for a business I'm planning to start in the next few months.

Am I correct in thinking this is how you treat equipment purchases when showing them in the CFF and PL sheets.

EG Vans £10k and machinery £8k

I have shown the purchases in month 1 at their full costs of £18k for the CFF and have shown just the depreciation in the PL sheet i.e £500 per month.

All help appreciated.

Correct, assuming of course that you will pay for the equipment up front, but the depreciation rate seems high - ie you will be writing them off in full in 3 years. The rate should reflect the disposal value at the end of the period at which you plan to replace them.

Your CFF will also want to reflect the effect of Capital Allowances on the tax payable.

Chris

[Ian1969]

Hi Chris,

Thanks for the reply.

Yes equipment bought outright in month 1.

You said .....

"Your CFF will also want to reflect the effect of Capital Allowances on the tax payable".

In laymans speak what does that mean please ? (sorry if these are basic questions)

Thanks in advance

Ian

[taxattack]

Hi Chris,

Thanks for the reply.

Yes equipment bought outright in month 1.

You said .....

"Your CFF will also want to reflect the effect of Capital Allowances on the tax payable".

In laymans speak what does that mean please ? (sorry if these are basic questions)

Thanks in advance

Ian

Hi Ian

Sorry for the obscure reply! When you complete your tax returns, whether as a sole trader or company, you have the opportunity to claim Capital Allowances. These are, in effect, depreciation for tax purposes, and will therefore affect the amount of tax paid. You will want your cash flow forecast to show this.

For vans and machinery you can usually claim up to 100% of the cost.

So all I'm saying really is that the cash flow forecast should include tax payable (or recoverable if you make a loss and can offset it against other income), and that can be reduced by CAs.

Hope that helps.

Chris