WNA Blog

Fri 17 Mar 2017

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


Finance & Insurance

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!


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