Getting the best from your Cash Flow Forecast

The principles of Cash Flow Management and Cash Flow Forecasting are quite straightforward and based on the fact is that businesses go 'bust' because they run out of money to pay the bills.  There may be underlying reasons why this has happened. . .   

• Underperformance in Sales
• Overheads too high
• Owner Manager taking too much out for personal use

. . . to name but 3 common problems but the plain truth is that for an owner of a small business the defence "I didn't know the bill had to be paid now" is actually no defence at all.

The purpose of the Cash Flow Forecast is to estimate the CASH required to get a business off the ground and to keep it there once trading has begun.  Accountants will often cry "Cash is King" and there can be no doubting the fact that getting to grips with the Cash Flow of your Business will improve your chances of survival and ultimate success immeasurably.

Firstly let us agree that a Cash Flow Forecast will allow you to: -

• Estimate your initial cash requirement to start the business
• Determine how much external funding (if any) will be required and..
• Show how you will be able to repay the external funding
• Determine how much money you can withdraw from the business for personal use
• To point up any potential cash flow problems in the future as the business grows 

Another key reason for maintaining an up-to-date Cash Flow Forecast is all to do with Debtors and Creditors and especially Debtors. Debtors are customers who do not pay for your goods or services at the time the transaction takes place.

If your business is working in a marketplace where waiting 30, 60 or even 90 days to get paid is the 'industry norm' monitoring your Cash Flow Forecast becomes increasingly important as does keeping track of the customers who are annoyingly slow to send their cheque to you.  The excuse of "the cheque's in the post" starts to wear a bit thin after a time.

READ MORE >