Cash Flow Forecasting

Setting up your own cash flow forecast is quick and simple and lets you monitor on-going revenue and expenditure easily, giving you a clearer picture of future cash flow issues both positive and negative.

No matter what business you are in, when it comes to cash flow the same principles apply; if you run out of cash your business will struggle to continue. If you can’t pay your suppliers, you will have nothing to see and it’s a quick and viscous circle from there to insolvency.
A good business must have a positive cash flow and one that is constantly monitored. This is where a cash flow forecast may help with business stabilisation. It’s a simple business tool which lets you foresee potential gaps in cash flow and gives you time to prepare with short term lending for example.
A basic cash flow forecast takes only a few hours to set up and a small amount of time each week to update. To get started you will need some basic information about the money coming in and out of the business each month. Enter any outgoing figures into the ‘expenditure’ part of your cash flow forecast adding in any constant monthly figures over the next 11 months too.
Next enter the figures for your revenue, remembering that work that may be completed might not necessarily be paid for another 30 or 60 days. Some of your revenue may come in the form of regular monthly payments, in which case add them in across the year, however some companies may be seasonal in nature.
Finally, add in the opening bank balance for that month and for each month as you go forward. Check that your bank statement matches up with your cash flow forecast so you can foresee any mistakes or over/under assumptions you may have made.
Your cash flow forecasting is now complete, but it’s vital that your forecast is reviewed on a regular basis, with every single income and expense added in. This information is invaluable to your company as if the forecast illustrates that you’ll be exceeding any agreed financial facilities within six months, you will have adequate time to prepare for it.

To talk through how we can help with cash flow planning call us now on 01824 707944.