The value of cashflow forecasting

So, now you’re tracking your cash flow and you know where your money is being earned and spent, the next step is cash flow forecasting. Cash flow forecasting is a projection of what your financial position is expected to look like in the next few months so you know when you need to take action to safeguard it. It also enables you to plan for different scenarios, identify areas where you could save costs, and create strategies to keep your cash flow where you want it to be. 

Forecasting your future cash pipeline 

Remaining in control of the cash coming into and going out of the business is the real focus, so you can accurately predict your financial position and can resolve any issues. 

Key ways to get more from your forecasting 

• Run regular forecasts – The financial landscape changes on a daily basis so a cash flow forecast is not a document that remains static. Variables and external drivers are literally changing each day, so it’s vital that you run frequent forecasts and react swiftly to any projected cash issues as they become apparent. 
• Use the latest cash flow forecasting apps – there are various cash flow forecasting apps that integrate with online accounting systems. These give you a more detailed view of how your cash inflows and outflows will look over the coming months – information that will inform and justify the decisions you make. 
• Explore the right revenue streams – most sectors will have seen sales affected due to staff being away sick and other pandemic related restrictions. Now’s the time to explore other revenue streams, such as selling online, and new opportunities for income. The idea is to find ways to increase the money that’s coming in the door and balance out your unavoidable expenses. 
• Get proactive with cost-cutting – if you can reduce cash outflows to a minimum, that will have a real impact on the health of your future cash flow. Pare back your operations and aim to reduce things like unnecessary software subscriptions, or over-ordering of basic supplies. Negotiating cheaper rates with suppliers, if possible, will also help. 
• Review your staffing needs – assess your staffing needs to minimise the costs of staffing and resourcing. Consider changing working hours for some staff, redeploying staff in different roles, and work-from-home/hybrid options. 
• Run a variety of scenarios – changing the financial drivers in your forecast model allows you to scenario-plan different strategies and options. Scenario-planning lets you answer questions, and will give you some hard evidence on which to base your decision-making and strategic outlook over the coming months. 
• Look at various ways to access funding – if forecasts show a cash flow issue coming up, we can assist your business to investigate how to minimise expenses and what funding opportunities are available. 

Talk to us about setting up cash flow forecasting 

Cash flow forecasting is an important step to give you the business intelligence to support your decision making, so get in touch with us if you’re unsure what your cash flow is.