Why you should have a cash flow forecast

cashflow forecast planning Jun 10, 2020
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...
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Getting the basics sorted out

finances planning support Mar 25, 2020

Last week, I had some interesting questions with two of my clients. One said that they were putting me on hold as they didn't have enough work for me due to coronavirus and another said they were so glad they were working with me as they need to plan for the lost of income due to the events side of their business.

Now is the time to know your numbers. Look at the following:-

  • Expenses - annual or monthly ones. Can you stop any of these if needed?
    Revenue - talk to your clients about what their expectations are and work with them as much as possible to find a good solution, rather than waiting for them to cancel.
  • Cash - do you know how long your cash will last for?
  • Get a breakeven number (where revenue equals costs) so you know what income you need to run your business.
  • Invoice promptly at all times, but especially at the moment, and shorten your payment terms where you can. Chase those debts soon after they are due as the financial position of companies is changing all the time.
  • ...
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