Keep an eye on the cash in your business
A cashflow forecast is a forecast that will show what the expected bank balance is at a date in future. This is important because it will help show you if you need to borrow money to fill in gaps in your bank balance.
It can help you stop disaster and tell you when you spend money on your business.
For instance, if you can’t afford to pay wages in three months’ time, because you have a big tax bill to pay. You are going to need to borrow money to pay the wages that month and pay it back the next month or a few months after. Knowing that will help make your business run smoother and make sure that all your bills can be paid.
You need to plan for any problems that your business may have. Planning early helps you solve them before they damage your business. it can also help see times when you do have money in the bank, and you can buy things for your business.
How do I get one?
Cashflow forecasts can be pretty difficult to do and they can get quite technical because we are looking at when things get paid rather than when they are due to be paid. So, we are looking at trends to see how customers paid in the past. If they pay after two months in the past, it is likely that trend will continue.
We look at the trends that have happened in the past and we predict what will happen in the future. What your tax bill will be like, what VAT will be paid, wages and any other bills you pay.
When we forecast this into the future it will give us a glimpse of what your bank account will be in the future.
Isn’t that a bit like guesswork? No, we build up a picture!
Well the future is never certain, and we would start with things that we know are certain. A lot of the expenses that you have are the same each month. Wages and office will be the same each month. VAT and taxes, we can calculate what they will be. We can look at what we expect the money received to be each month. We build up a picture of what we expect the money in and out to be.
The more that we do this the better we get
Like anything we do, the more we do it the better we get. The forecasts will get better each time as we see more or how your business works and we forecast this forward.
What if?
We can also build in what if scenarios? What if you won a new project or lost an important client? How would that impact your business and what actions would you need to take as a result. This is useful and you can actually use it to decide if you should take on a project or reject it.
Cashflow help you make better decisions
Doing a cashflow will help you make better decisions for your business. It will help you plan for the future and give you greater confidence to make decisions now if you can see how they will likely affect your business in future.