In my opinion, a cash flow forecast is one of the most important financial planning tools a business can have. If you keep track of cash movements, you will be in control of one of the main lifelines of your business.
New businesses need cash flow to project how income and expenditure could increase or decrease with different investments and fluctuations in sales and purchases – for example, when should you spend on marketing ? and how much can your business afford to spend ?
Established businesses need cash flow forecasts to establish controlled growth opportunities, by flexing sales income to view ‘What if …’ situations, for example,
· What if sales exceed expectations …
· What if sales fall below expectation …
· What impact would this have on the overall business cash situation ?
· Can the business still be viable if cash income is low for a period of time ?
· How long is that ‘period’ of time ?
Many, many more questions, but they are an example of classic everyday business questions that small business owners face, and although cash flow forecasts do not have all the answers, they give managers a great insight to plan for good times ahead and not so good times, and therefore help to manage the business through its business journey.
Obviously once a cash flow forecast is completed, it will need updating with actual financial data, which then helps you plan ahead. As actual details are entered, you will see how accurate your forecast is going forward, and can then flex the data accordingly. The cash flow should be a live document, not fixed data and then never looked at, it’s a management tool, therefore let it help you plan ahead to manage your business.
If anyone would like any further information on cash flow forecasting please contact Jane Dean at J D Figures Limited at jane.dean@jdfigures.co.uk or call 01922 214033 or 07885 268600 for a friendly informal discussion, or to arrange a free, no obligation meeting to see how we can work with you and your business.
Please view our testimonials at http://www.thebestof.co.uk/local/walsall/business-guide/feature/jd-figures/81746/review
