Team Forecast • November 22, 2017
When it comes to running and managing your own business, one of the hardest things is to think about your finances and keeping track of them. Plenty of smaller businesses think that financial management and forecasts are only for larger companies. However, they can be incredibly valuable for any sized business.
In fact, you are running a smaller business then you may not have as much emergency funds then a larger company. This means that you need to keep a closer eye on your out goings and in goings. This comes in the form of a cash flow forecast.
But what is a cash flow forecast and what are the benefits of creating one?
When it comes to putting together a cash flow forecast, there are three main things that you need to look at. Sales, profits and loss and of course cash flow. You should always aim to make your forecast as accurate and comprehensive as possible. Including as much information on your sales, costs and cash transactions.
The first thing to do is to create a sales forecast, which is a plan of how much you think that you may sell in the future, broken down on a month by month basis. Then you need to look at your sales, and this comes in the form of a profit and loss forecast. You need to consider your day-to-day running costs as well as the income that you expect your business to bring in.
This will all come together to create a cash flow forecast which will show you where your money is coming in and going out, as well as how much.
There are a number of reasons why you should make an effort to create a cash flow forecast. It gives you the opportunity to look at how much you are likely to spend over a particular period of time, as well as think about the amount of sales that you hope to achieve in the same period.
One of the most useful things about having a cash flow forecast is that it allows you to understand when cash will come into our bank account and when it will be leaving. It can also be used to make important decisions regarding your business, questions such as releasing a new product or service, or whether you need to recruit more staff.
As you can see, there are a variety of reasons why you should take the time to create a cash flow forecast. However, it might not be the easiest thing to do. Lack of time and lack of knowledge are two of the things that can mean that it is hard to put together a forecast for your business to use. But then…that’s why we built Forecast!