7 reasons why you should be doing a cashflow forecast
1.AVOID CASHFLOW SHORTAGES
Running out of cash should NEVER be a surprise. Forecasting cash flow will help you understand whether you can weather a storm, need short term funding to plug a gap, or to make cut backs.
2.SCENARIO BASED DECISION MAKING
Are you looking at recruiting a senior hire, or are you looking at investing in some new equipment in the near future? Whatever it is you’re looking at changing, would you like to have visibility of how these decisions may impact your business? Why not use a cash flow forecast to enable informed decisions, which will ultimately help to grow your business.
3.CREATE FANTASTIC RELATIONSHIPS
If there’s one payment that has to be made each month it’s the payroll. Make sure you’re maintaining a positive culture by paying your team on time! What about your suppliers? Prompt payment helps to build a great relationship. Ensure you never pay those key supplies late again, by utilising a real time cash flow forecasting tool.
4.FUNDING
Looking for funding? Preparing real time cash flow forecasts shows potential lenders that you are a serious business and are financially literate.
5.EXIT PLANNING
What is the end goal? At some stage, you will be looking to exit your business. Having a cash flow forecast in place will allow serious investors to have comfort on the company’s sustainability, which in turn will help maximise the value of your business on sale!
5.PLAN FOR ONE-OFF’S
Have you ever forgotten to include those one off costs within your projections? For example Corporation tax, VAT bills, PAYE? Ensure that these are recorded in advance, so you can have a clear indication of how the next 12 months may look. At the very least a cash flow forecast should run through to the next VAT payment. Don’t be thrown off track with those ‘unknown’ costs!
7.GET A GOOD NIGHTS’ SLEEP!
Many owner managed business’s largest concern is cash!! “Will I be able to pay my staff, pay my suppliers and afford to pay my own mortgage?”. The strangest thing is, most owner managed businesses don’t forecast cash on a regular basis! Why not take away the uncertainty and forecast your cash flows to allow you to sleep better! Having visibility of the future gives owners control, allowing them to make decisions based on expectations, rather than the unknown! We can’t promise, but we reckon that this may even help you sleep at night!
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