The value of cashflow forecasting
13 July 2022
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.
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As an employer, there are several obligations and expectations set by the Inland Revenue Department (IRD) that you must adhere to. Understanding these requirements is essential for maintaining compliance and avoiding any potential penalties. Let's take a closer look at what the IRD expects from you as an employer. Register as an Employer Before you hire your first employee, you are required to register as an employer with the IRD. This is a crucial first step in ensuring that you can meet all tax and payroll obligations. Accurate Record Keeping The IRD requires you to keep accurate and detailed records of all employment-related transactions. This includes: Employee personal details Wages and salary paid Payroll dates and methods PAYE deductions and remittances Details of benefits or allowances provided to employees Maintaining proper records helps ensure that you are reporting and remitting the correct amounts to the IRD. Deduct PAYE Tax You are responsible for deducting PAYE (Pay As You Earn) tax from your employees' pay. This involves calculating the correct amount of PAYE and ensuring it is deducted from each employee's salary or wages before their net pay is provided. Pay Employer Contributions In addition to PAYE, you may also be responsible for contributing to your employees' social security and retirement benefits, depending on the country you operate in. These contributions are typically paid in conjunction with PAYE tax. Issue Statements and Forms At the end of the tax year or upon employment termination, you should provide each employee with a statement showing their total earnings and PAYE deductions. Additionally, filing the appropriate end-of-year PAYE schedules with the IRD is required. File Employer Returns Employers are required to file regular returns with the IRD, which could be monthly, quarterly, or annually, depending on specific regulations. These returns should accurately report all payroll activities, including PAYE deductions. Handle Tax Codes and Changes It's crucial to apply the correct tax codes for each employee's circumstances. Any changes in employment status or tax code must be updated promptly to ensure accurate tax withholdings. Comply with Audit Requests The IRD may audit your business to ensure compliance with employer obligations. As such, being prepared to provide all requested information and records in a timely manner is vital. Adhering to these expectations from the IRD is not just about compliance; it's about fostering a transparent and trustworthy relationship with your employees and the tax authorities. If you need assistance with understanding or managing your obligations as an employer, consider reaching out to a professional accountant. Our team is here to help you navigate these responsibilities seamlessly, ensuring peace of mind and allowing you to focus on growing your business. Feel free to contact us for further information or assistance.
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