Managing cash flow is a vital part of running a successful business. Some business owners think managing cash flow simply means keeping track of how much money enters and leaves their business, but there\u2019s actually more that goes into it.<\/p>\n
Cash flow forecasting, for example, is an incredibly valuable tool that helps you anticipate cash flow issues, plan for days when your cash flow is limited, and show the bank that you are prepared.<\/p>\n
It\u2019s an important process that you shouldn\u2019t ignore. Here are some ways cash flow forecasts help entrepreneurs.<\/p>\n
Most businesses go through slow periods. Sometimes, those periods are obvious. A seasonal business, for example, will have decreased income during the off-season than during the on-season. There can be less obvious peaks and valleys in your income, though, that you have to prepare for.<\/p>\n
Your cash flow forecast can help you monitor your day-to-day cash flow and anticipate when times will be slow before they hit. By anticipating when cash coming into your business might be light\u2014or when you might have to spend more than you\u2019re accustomed to\u2014you can avoid a cash crisis.<\/p>\n
By examining your cash flow over the previous years and forecasting your future cash flow, you can better anticipate financial cycles and how they affect your bottom line.<\/p>\n
It\u2019s tempting to spend money when you have a lot coming in. Your business may need new equipment or maybe you want to give all your employees a raise or a bonus.
\nThat\u2019s a great thing to do, but it\u2019s only helpful if it doesn\u2019t put your business in jeopardy financially.<\/p>\n
Cash flow forecasting is a great reminder about how your bank accounts will look during tougher times, so you can make important decisions about when to spend your money and when to save it.<\/p>\n
If you know a slow period is coming up, it might be better to save your money for now and give out smaller bonuses. If you can anticipate your slow period, you can plan major purchases and bill payments around it, to stretch your cash further.<\/p>\n
At least by conducting cash flow forecasts you\u2019re less likely to be surprised by a sudden cash flow crisis.<\/p>\n
Banks prefer to give their money to entrepreneurs who show they are capable of planning ahead. Financial institutions prefer business owners who are realistic with their financial projections and show they have a means of addressing cash flow issues.<\/p>\n
Forecasting your cash flow gives you a clearer picture overall about your business and how the money moves into and out of it. It provides important insight into your company\u2019s financial health.<\/p>\n
If you haven\u2019t conducted cash flow forecasting so far, it\u2019s a good idea to get started now so you have a better understanding of your company\u2019s finances and so you can prepare for the future.<\/p>\n
Want help to improve your cashflow? Contact us today.<\/p>\n","protected":false},"excerpt":{"rendered":"