ABOUT THE CONTRIBUTOR

Lisa Stoneham
Lisa Stoneham Lisa Stoneham is a qualified accountant and bookkeeper, helping her clients make more money with less effort. Lisa will make sure your numbers are right, so your tax accountant can do your annual tax returns easily and have time to give you strategic advice instead of chasing transaction errors. This means you can work ON your business, make better decisions – and you won’t need to worry about problems with the ATO. Lisa has been managing business numbers since 2005, and in July 2015, she realised her dream to run her own business when she started Straight Forward Accounting, Solutions. She specialise in XERO accounting software because of its ability to provide real time financial access – any time, any where. XERO is a game-changer for small businesses, making them smarter, more agile and more competitive. By helping you make sense of your numbers she enables you to make great decisions about your business. This gives you your time back to work on growing your business.

Lisa Stoneham has written 15 article(s) for us.

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Do You Know If Your Business Will Have Any Cash Next Month?

March 17, 2017 | Lisa Stoneham

In my last blog post we explored the annual budget. The sixth and final part of our series of blog posts on ‘Understanding Your Numbers’ will look at the cash flow forecast to identify what information it provides and how to make the best use of it.

Your Cash Flow Forecast report is an estimate of the inflows and outflows of cash for a future given period. It gives you the real-life details and tells you when the actual cash should move.

A Cash Flow Forecast is about regular cash transactions – it doesn’t consider accruals and adjustments such as depreciation (for example, as your company car gets older). It’s about ACTUAL cash flowing in and out of your business. It should include large capital purchases so you know that they will need to be paid for – and when. With a good Cash Flow Forecast, you can be on the front foot – not on the back foot.

When I put together a 6-week cash flow forecast for one of our customers, it highlighted that the business would run out of cash in a matter of weeks. This period was going to tie in with the Christmas shutdown so the cash issue needed to be resolved before the Christmas break.

Because we had this critical information, we were able to find a solution – to work hard on collecting unpaid invoices from customers. By doing this, we were able to generate a large inflow of cash before the Christmas break. This gave the company enough cash to last them through the holiday season.

How is Budget Different from Cash Flow? Both your Budget and your Cash Flow are about your plans for what you want to achieve.

The main difference is based on:

  1. The types of the transaction
  2. The timing when receipts and payments will occur

For example, for an invoice to one of your customers:

  • Your budget will record the income based on the date on your invoice.
  • Your cash flow will record it when you actually receive payment to your bank ?account.

Do you take the time to prepare a cash flow forecast? How has doing a proper cash flow forecast helped your business?

Would love to hear your thoughts!