Why you should prepare a cash flow forecast

A cash flow forecast is a financial road map, which attempts to predict all the cash movements in and out of your bank account over a set period of time. It is key to business sustainability and success. Why? Many good businesses can be profitable, but may still run out of money if they, for instance, buy big pieces of plant and equipment or have large loan repayments.

So, if your business has $5,000 in the bank and you want to end the year with a cash balance of $50,000, the only reliable way to achieve this is to plan.

It’s important to note, however, that cash flow forecasts, despite best intentions, will almost certainly turn out wrong every year in some way. I’d bet that no business person ever has got to the end of the year, compared actual results to their forecast, and given themselves a big pat on the back while thinking ‘well done, a perfect match!’   

The fact is that life happens while we’re working, and things change that affect cash flow. So forget about perfection and remember that the process of planning is far more important than the plan itself. Or as former US president, Dwight Eisenhower, said: “In preparing for battle I have always found that plans are useless, but planning is indispensable.” 

Transform information into a forecast

Depending on your level of skill, and the time and energy you have, you can choose to:

1) Go it alone

Check out our blog on how to start a cash flow forecast.

2) Lean on software

Cash flow forecasting software that links to your accounting software will cut down on manual entry. Depending what accounting software you use, you should be able to find some connecting cash flow forecast software. You can ask your accounting software provider for the best option.

3) Get a professional to do it

This is the low fuss way to get there, but you should still involve yourself in the process or a good portion of the benefits will be lost. Thinking through different scenarios and understanding what drives your business will inform how you run and develop your business. A professional can help with that.

Beany charges between $495 and $995 for a sound, responsive cash flow forecast, which is inputted into your accounting software so you can track how you’re going through the year.

Call us on 0800 755 333 if you want to discuss your particular situation with one of the Beany team or get in touch Beany Support.

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