Are you experiencing cash flow pressure in your business? Do you know what is causing it? If you don’t, we do.
With today’s financial climate fluctuating almost daily, it’s important to stay on top of your businesses cash flow. It is critical to understand your cash flow and have a plan in place for any unexpected issues. We believe in planning ahead, so having a cash flow forecast is vital to effectively managing your business.
“Plan ahead” – Cash Flow forecasts
A cash flow forecast is a key diagnostic tool for the health of your business. Small business owners often shy away from putting together a forecast because they find it hard to gauge the effect that different factors will have on cash flow events. The introduction of a new product line, marketing venture, or an extra staff member can all affect your business’ cash flow, so it’s important to plan for that event.
Three tips for a solid cash flow forecast:
- Keep it simple: Focus first on the items that affect your cash flow most and add extras elements to the forecast if you need.
- Standardise: Ensure procedures for collecting and reporting cash flow data are consistent across the business. This will make sure you avoid any surprises.
- Measure your accuracy: Set how much variation from your cash flow targets you are prepared to accept, and see how close you get each month. Where targets are missed, investigate the reasons and adapt your forecast if you need to.
Profit vs. Cash Flow
It’s a common misconception that success in business is all about profit. The true success of a business comes when you manage the money coming into the business and balance it against the money going out so that there is always sufficient cash to cover what your business owes.
Mead Partners can provide a much more detailed cash flow analysis for your business. Find out more about our forecasting and Elementary tools to see how we can give you simple solutions to make your business better.
For even more information on cash flow management, speak to one of our team today.