by Steven Roxby


At this time of the year, many business owners are reflecting on the financial year that was, and actioning strategies for tax minimisation.

We believe that this is the perfect time of year to also consider your projected trading for next year, both from a profitability and cashflow perspective. 

Why do we believe this is important?


  1. The forecast of your projected income and expenses for the next twelve months allows you to revisit the strategies that are being planned for in the business.  Considering the projected financial performance with those strategies can provide additional incentive to strive to meet those financial targets.
  2. The projection of expenses allows you to review each and every cost to confirm you are receiving value for the costs that are being incurred across all areas of the business.
  3. The projection of wages and labour costs is an opportune time to assess your team, including their respective responsibilities and efficiency.
  4. When you project future income and expenses, you will soon identify whether the business is profitable or not.  This will allow you to assess your future taxable profit, and adopt strategies to reduce income tax.  A lot of businesses leave income tax minimisation to the end of the financial year. Forecasting in advance allows you to assess prospective liabilities throughout the year, and plan accordingly.
  5. Many businesses are profitable, yet cashflow poor.  Quite simply there is a difference between profit and cash.  Major impacts of cashflow in business will be such items as collection of debtors, loan repayments and debt reduction, capital acquisitions, and owners drawings, to name a few.
  6. Once a projection of profitability and cashflow has been prepared, a quick review of the break even sales position is also of benefit.  This allows you to ensure that the minimum level of sales to be achieved is known, and  to ensure that the business is viable.


The preparation of a cashflow forecast and profitability projection can either be very detailed, or a simple high level review of the projected income, major expenses, and the profitability and cashflow. 

At Maxim Accounting we prepare cashflow and profitability projections  for many businesses, and review the actual to budget performance on a regular basis. 

importance_of_projections.jpgIf you  wish to consider the benefits of the projections for your business, or you know of a business owner that does wish to understand more about the financial projections and monitoring of their business, please give us a call on 0249 25 1000.

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