Cash Flow Forecasting
Cash flow is the lifeblood of any business.
In fact, the number one small business problem is management of cash flow. More often, business fail because they run out of cash rather than not being profitable.
Will your business run out of cash? Does your business have enough cash to survive? What will happen if you lose a major customer? Do you know, or are you just guessing?
You need to be able to rely on an accurate cash flow forecast. Running your business without one is like planning a trip without a map and relying on the balance of your bank account is a recipe for disaster. You need a clear understanding of the monies available in your business, what expenses you have, and when those expenses are due. No one wants their business to fail, but many people never give cash flow forecasting the necessary time it takes to succeed.
Here are five Small Business Cash Flow Rules, every business must adopt:
- Focus on Cash Flow Management, not profit
- Maintain some cash reserves
- Review your numbers daily or weekly
- Put processes in place to ensure clients pay faster
- Ensure your Accounts are up to date
Cash flow forecasting is important because it tells you:
- Potential upcoming shortfalls in cash balances
- If you have enough cash to pay your supplies, taxes and any employee obligations.
Too much time is wasted chasing money when you need it. Often this is a result of poor process.
This becomes more evident when businesses grow quickly and don’t calculate the impact of their trading terms on the amount of cash available.
The success of your business requires the proper processes in place. Accurate cash flow forecasting is one of those processes. So take some time out of your busy schedule, have a look at your cash position and think about where you want to be in 12 months, 2 years, 5 years time or come in and speak to Nathan about setting up an accurate cash flow forecast for your business. If you don’t plan ahead, you are guaranteed to run into a few roadblocks.
Don’t show an end of year profit on paper, yet be running out of cash.
Get the numbers and advice that you need to ensure your business success for years to come.
Arrange a meeting today with our Springwood Accounting team and get the best advice for your business.