If you're already planning your balance sheet and your cash flow, fantastic. This post is not for you.
More than once, though, I've seen teams shy away from a full three statement plan. Generally, it's because they feel they're barely keeping their heads about water just doing the P&L plan.
Which I understand.
But there's a lot of value in having even an entry level plan of the balance sheet and cash flow, for largely the same reasons as we do for our actuals.
The key to dropping the fear is to simply recognise that your budgetholders don't have to be particularly involved in the balance sheet and cash flow plan.
Get them to plan to the P&L, then apply assumptions to forecast the balance sheet.
They needn't be complicated. For converting sales to receivables vs cash, a common method is to calculate days sales outstanding; I'm not personally a fan of that approach. I think most businesses can fairly easily generate figures for how many invoices are paid within 30/60/90/120 etc, so why not use that in your planning?
Capex wise, unless you're capital intensive, most fixed asset stuff should be driver based anyway - new equipment with new hires etc - and it's not generally a big step to extend that to the balance sheet accounts.
Once you have your forecast balance sheet, my normal recommendation is to then just take an indirect cash flow off the balance sheet movements. Assign each balance sheet account to a cash flow heading and you're done.
Of course, there's a huge amount more that you can do with these - for example, a direct cash flow forecast - but if you're not doing anything now, this baseline is very simple to achieve, will deliver useful insight immediately, and can be a stepping stone to more if you feel you need it.
