Italian three-year sources and uses of funds forecast (preventivo delle fonti e degli impieghi)

Sources and assumptions

Calculation assumptions

• The lines are those of the Turin Chamber of Commerce guide to starting a business. Uses: “investimenti in capitale fisso” (fixed capital), “investimenti in capitale circolante” (working capital), “impieghi per rimborso di debiti” (debt repayment), “impieghi per rimborsi di capitale proprio” (returns of equity), “impieghi per deficit della gestione” (operating deficit). Sources: equity, debt (third-party capital), “disinvestimenti (realizzi di capitale fisso o circolante)” (disposals, realisation of fixed or working capital), here of working capital only, self-financing. Grants and incentives are a separate source, because the guide lists them among the resources for investment (“eventuali provvidenze agevolative”).
• Three years, because the guide asks for statements “su un orizzonte di almeno tre anni” (over at least three years): that is the minimum, not a cap.
• Working capital is entered as the year-end balance (inventory plus trade receivables less trade payables, cash excluded): only its increase is a use; a decrease is a disposal, recorded among sources as the guide says (“disinvestimenti (realizzi di capitale fisso o circolante)”, realisation of fixed or working capital). A year 2 or year 3 left blank keeps the previous year's balance, so the same need is never financed three times. The year 1 change starts from working capital at the start of year 1, which is zero unless you enter it: that is the case of a new business. For a business already trading, enter the balance at the end of the previous financial year, or all of the year-end working capital of year 1 is counted as a year 1 use.
• The guide lists among uses “investimenti in capitale circolante (denaro liquido, scorte, ecc.)” (investment in working capital: cash, inventory and so on) and among sources “finanziamenti mediante debiti (capitale di terzi)” (financing through debt, third-party capital). Here working capital is entered net of trade payables: supplier credit is not shown as a separate source, it reduces the use of funds in working capital. This presentation departs from the guide: total uses and total sources may come out lower than in a statement that keeps them apart, but the balance does not change. If trade payables exceed inventory and receivables, net working capital is negative: enter it with a minus sign. A fall in it, for instance supplier credit growing faster than inventory and receivables, shows among sources, on the working-capital-released line; a rise shows among uses.
• Debt repayment is the capital part of the instalments only: interest is an income-statement cost and is already inside self-financing.
• Expected self-financing is profit plus depreciation, before drawings and net of capital grants, as the forecast income statement (preventivo economico) works it out. The guide defines it “in prima approssimazione” (as a first approximation) as “Reddito operativo di esercizio + Ammortamenti + Accantonemanti a fondi rischi e fondi spese future con scadenze superiore all'anno (es. fondo TFR)” (operating income plus depreciation plus provisions for risks and future charges due beyond one year, such as the severance pay fund); starting from profit also deducts interest and taxes, cash payments that this statement has nowhere else. Provisions of this kind (for instance to the TFR severance fund) are costs that do not leave the till during the year: if your profit is after them, add them to self-financing. The ActioFin forecast income statement does not model them: its self-financing leaves them out and is therefore on the cautious side.
• Negative self-financing is not a negative source: as the guide puts it, it is “un fabbisogno finanziario da iscrivere tra gli impieghi (per «deficit della gestione operativa»)” (a funding need to record among uses, as an operating deficit). The calculator adds it to uses and removes it from negative sources: the balance does not change. The guide measures that flow on operating income; here self-financing starts from profit, after interest and taxes, so it can be negative even when operations generate funds: that is why the line is called a deficit from operations in the wider sense of the guide's list of uses (“deficit della gestione”), not an operating deficit (“deficit della gestione operativa”).
• The guide starts from the identity “totale fonti = totale impieghi” (total sources equal total uses): cash is itself a use. Here cash stays outside working capital, and the balance is the cash the plan leaves (when positive) or the need it does not cover (when negative).
• Partners' loans are shown separately from bank loans: article 2425-ter of the Italian Civil Code requires the cash-flow statement to show “con autonoma indicazione, le operazioni con i soci” (dealings with partners, stated separately).
• Not modelled: disposals of fixed assets, VAT, and the month-by-month cash budget, which the guide presents as a separate second part of the financial forecast.