Cash flow forecasting is critical in any business but lots of people neglect this area.
Imagine for a moment that you are wanting to buy a new car but you don’t have the cash for it. You look at the options – you could lease, which would be more expensive but would only mean a monthly outlay, or you could save up to buy the car outright. For each option, you would look at how you would save the money, or whether you could afford the monthly lease repayments.
You might look at your household budget, if you have one, or make a guess based on your bank balance, or just decide without looking and say you will put any shortage on your credit card.
Without planning, this could lead to significant debt. You might choose a car that is more expensive than you can afford, or have monthly payments you can’t meet.
It’s the same with having a cash flow forecast in your business. How do you know whether you can...