Cashflow

The big banking crash of 2008 brought years of struggle for business owners and investors alike. Cash, or a shortage of it, led to major issues for businesses across the country and indeed the world, big or small.

Fear of another recession, like we saw in the aftermath of the gigantic collapse in 2008, is always at the back of the mind of all businesses.  Yet there are safeguards from the dreaded thought of running out of cash, and one of those is the cashflow forecast.

You need visibility on your cash flow

It may seem obvious but keeping an eye on your cash movements is vital for any CFO and business owner.  Blink and the cash can run away. However, even after these clear and quite frankly obvious observations, people still blink.

However, even after these clear and quite frankly obvious observations, people still blink.

But by carrying out these steps, you can manage to keep your cashflow from running away…

Step 1 – Forecasting

Like a roadmap in a…road trip, your business journey should start with a cash flow forecast. This small step of planning will help you realise straight away if the business will travel in the months ahead with hard cash or P&L. Anticipating what is coming, and what you can spend, limits the potential nasty surprises.

Step 2 – Gain and keep the stakeholders trust

Investors and loan providers are two individuals that have a clear stake in your business, and at times they need confidence. The two example stakeholders may not have interaction with your business on a day to day footing or with the new sales and the firefighting that comes with bills.

But what they do want is a return on their input.

An outline of how you will reach your targets and come through the bad times is a start.  This is why a cashflow forecast will give any investor knowledge of what can be achieved.

For an investor, a cashflow forecast is a plan for how you will get through the bad times and ride the good times. They let these stakeholders know precisely how to anticipate a return on their investments.

Step 3 – Identify lows and highs

Seeing a potential cash shortage ahead of it happening can literally save your business. It anticipates the problem before it happens and gives you time to find the solution; the cash flow forecast does this precisely.

It forecasts the cash you will have, anticipating the problems and letting you save on the highs.

  • Keep your bills paid on time

Paying your suppliers on time will mean that you can keep things moving, continue the trust and not let any disputes get out of hand. It means you can control your cash and know roughly when it goes out to meet the invoices of your suppliers.

  • Track spending and stay within your budget

A cashflow forecast gives you a brilliant way to see precisely what you need to do to track your spending and income, and to stay well on course with your budget; it, in fact, allows you an accurate figure once you keep your cashflow forecast up to date.

  • Money Owed

Identify those late payers so you know who pays on time and who costs you money, effectively improving the credit control process. A cashflow forecast allows real-time tracking of what is coming in and when.