Business Cash Flow Forecasting 101 | Master The Numbers

Business Cash Flow Forecasting 101 Master The Numbers

Empower your business with strategic financial planning and explore the basics of business cash flow forecasting to enhance your cash flow management.

Projecting your cashflow pipeline forwards is vital.

To be able to navigate the future path of your cashflow, you need to start forecasting – so you can map out your financial position over the coming months and can take the appropriate action to safeguard your cash position.

Plus, when you have access to detailed forecasts you can scenario-plan, search for cost-savings and look for strategies that will preserve your cashflow position.

The value of business cash flow forecasting

Business cash flow forecasting holds immense value for companies as it serves as a strategic tool to navigate the dynamic financial landscape. By projecting future cash inflows and outflows, businesses gain foresight into their financial health, enabling them to make informed decisions. This invaluable insight helps in anticipating periods of surplus or deficit, allowing businesses to proactively address potential challenges or capitalize on opportunities.

Moreover, cash flow forecasting aids in setting realistic financial goals, ensuring that businesses can allocate resources efficiently, manage working capital effectively, and maintain liquidity. This proactive approach not only safeguards against unforeseen financial crises but also positions the company to seize growth opportunities with greater confidence.

Forecasting your future cash pipeline

Remaining in control of the cash coming into (and going out of) the business is the real focus, so you can accurately predict your financial position and can resolve any issues

Furthermore, business cash flow forecasting is instrumental in fostering financial discipline and accountability within an organization. It encourages a meticulous examination of all financial aspects, prompting businesses to critically assess their revenue streams, monitor expenses, and identify areas for improvement. The ability to foresee cash fluctuations allows businesses to optimize their financial strategies, negotiate better terms with suppliers, and maintain a healthy financial position. Ultimately, the value of business cash flow forecasting lies not only in safeguarding against financial uncertainties but also in providing a roadmap for sustainable growth and financial stability.

Key ways to get more from your forecasting

- Run regular forecasts – The financial landscape is changing on a daily basis at present. A cashflow forecast is not a document that remains static. Variables and external drivers are literally changing each day, so it’s vital that you run frequent forecasts and react swiftly to any projected cash issues as they become apparent.

- Use the latest cashflow forecasting apps – cashflow forecasting apps, like Fluidly, Float, or Futrli, integrate with your Xero accounts, giving a drilled-down view of how your cash inflows and outflows will pan out over the coming months – information that will inform and justify the decisions you make during these extremely challenging times.

- Explore the right revenue streams – most sectors will have seen their face-to-face sales drop to absolute zero since quarantine restrictions came into place. To overcome this, there’s a real imperative to explore revenue streams and new opportunities for income. An example of this is coffee shops that now sell roasted beans online (this will depend on lockdown restrictions). The idea is to find ways to increase the money that’s coming in the door and balance out your unavoidable expenses.

- Get proactive with cost-cutting – if you can reduce cash outflows to a minimum, that will have a real impact on the health of your future cashflow. Pare back your operations and aim to reduce things like unnecessary software subscriptions, or over-ordering of basic supplies. Negotiating cheaper rates with suppliers, if possible, will also help.

- Review your staffing needs – now’s not the time to make anyone redundant, but you can look at ways to reduce the costs of staffing and resourcing. Reducing working hours or redeploying staff in different roles are all options that reduce payroll costs, while also looking after your staff’s welfare.

- Run a variety of scenarios – changing the financial drivers in your forecast model allows you to scenario-plan different strategies and options. Many of these will be in a long-term plan when restrictions ease. Scenario-planning lets you answer questions and will give you some hard evidence on which to base your decision-making and strategic outlook over the coming months.

- Look at various ways to access funding – if forecasts show a giant cashflow hole coming up, you’re going to need additional funding to get through this crisis. We can assist your business to investigate funding opportunities from grants, banks, loan providers, alternative lenders and crowd-sourcing funders.

Talk to us about setting up your business cash flow forecasting

Forecasting is an important step to give you the business intelligence to support your decision making.

Get in touch to improve your control over cashflow.

Related Link:
Business cash flow forecasting | business.gov.au

Acro Accounting & Financial Planning (AAFP) offers a one stop solution right from accounting, taxation, financial planning to other business advisory services. As Certified Practicing Accountants (CPA’s) and professional tax advisors, we pride ourselves on being experts with the latest developments relating to business and taxation. We as professional public practice firm, provide high quality taxation and business advice to our clients through a personalised service at competitive rates.

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