Cashflow forecasting plays a crucial role in the running of your business. It estimates cash coming in and going out based on past business performance.

This allows you to identify any problems that may occur and allow you to plan ahead accordingly. 

Below are four steps that will help your business with cashflow forecasting.

Forecast your income or sales

When starting your forecast, you will need to look at what period of time you would like to forecast for. A lot of businesses find monthly forecasting best as it lets you see what’s ahead quickly and allows you to forward plan.

It is a good idea to look at the previous year’s figures as this will allow you to see if there are any trends whether that be sales increased, decreased, or stayed the same.

When forecasting your income and sales make sure you estimate when payments will be made and look at whether there is any marketing activity planned that may see an increase in sales.

Cut Costs

Creating an audit of all your business expenses is a good idea as it will allow you to determine which areas within the business you can save money, as well as give you the opportunity to see if there are things you are paying for that your business are no longer using or require. By selling those assets you will increase cash within the business, whilst saving on costs.

Estimate your cash outflow and expenses

When you are calculating your cash outflows make sure you work out how much it costs to make goods available. This will make it easier when adjusting your sales numbers in the future.

Besides from normal running expenses, cash can leave a business in many different ways including:

• Buying new assets
• ‘one-off’ bank fees such as loan establishment fees
• Loan repayments
• Payments to the owner(s)
• Investing surplus funds

Review and update

Make sure your forecasts are updated and reviewed on a regular basis to ensure they have the correct information. Going back and checking your estimates against the actual cashflows for the period will highlight any differences so you can see where your cashflow didn’t meet your expectations and allow you to prepare for next month’s forecast.

Contact our team today on 1300 4 MORRIS and speak to one of our finance specialists to see how we can assist your business.