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Business Management Services

Cash Flow Forecasts

Cash flow forecasts

When you are busy running a business it can be easy to become immersed in the day to day detail and not have the time to look at the ‘bigger picture’, even though you know you should!

Cash flow forecasting is an important tool to help you see where the business is going, helping you to plan and manage money more effectively – and ultimately providing the ‘bigger picture’.

What is a Cash Flow Forecast?

Understanding your business cash flow is vital for your business, cash flow forecasting is an important part of your finances. A cash flow forecast is a document that will help you predict the amount of money going in and out of your business. It will also show the protected income and expenses. Cash flow forecasts usually cover the next 12 months but can also be done to project shorter timescales like a week or month.

Cash flow forecasts will enable you to really get to grips with the business and see how it will evolve over the coming weeks and months, providing information on sales, types of revenue, gross profit and projected cash receipts.

Why use a Cash Flow Forecast?

A cash flow forecast is mainly used to help a business owner plan how much cash they will need in the future. They can show if your business is meeting expectations. If you compare your income and expenses with your forecast you can see which parts of your business are not performing and adjust accordingly.

A forecast can help you budget for purchases your business may need, or identify the need for a small business loan. This will help with your tax preparation.

It can help you plan for business changes. For example, if you plan on hiring a new employee it can help you see how this will effect your business financially and plan for it.

You can run possible business changes through your forecast to see how it would financially have an impact. If you can predict any shortfalls or surplus you can adjust your business decisions based on this. It helps you plan more effectively for the month or year and make sure you forecast cash flow to assist you with the management of your business.

You can run projected scenarios of best and worst cases to see how your business would run and cope during difficult times such as Covid-19. Planning what you business could afford to do if sales are much better than you had hoped for. Covid-19 was an unexpected turn for many businesses, we had to adjust our management skills, change the process of how we worked for a period of uncertain times. By planning and using a cash flow forecast you can take a look at your sales, financial costs,

Forecasting your company’s cash flow can be tricky because of the many variables that determine how much cash you will need for operations versus the amount available. Cash flow forecasts can vary in detail and complexity dependent upon your needs, ranging from a spreadsheet showing costs of cash in/out to much more complex balanced projections used for security or raising money.

Royston Parkin can prepare the right kind of forecast for your situation. We have the experience and expertise to ensure your financial forecast is right, all of the important revenue, payments, assets, expenses and income are included and ensuring the balance is right. By us making a start to plan the future of your business, it may leave you free time to work on planning other areas of your business.

Do you need budgets for the first year of trading?

To predict the need for cash and ensure you are sufficiently capitalised?

Need a cash flow forecast to demonstrate your credit worthiness and help you secure finance?

cash flow forecast

It is also useful to run ‘what if’ scenarios, to gauge the effect of different sales/profits levels and identify key risks to the business.

Good, accurate cash flow forecasts are all about helping you to see the future more clearly.

Royston Parkin doesn’t have a crystal ball, but we do have very good vision.