A quick guide to cash-flow forecasting

Posted on: 17 Mar 2025 at 12:50 am

A quick glance:

Controlling cash flow does not have to be complicated however it’s more than an occasional glance at your business’s bank account.

A good understanding of the flow of cash allows you to profit from opportunities, such as purchasing an asset that is new, hiring extra staff, utilising a discount.

Paying on time is crucial to ensure cash flow so don’t let your creditors slow you down.

Heads up: looking at your bank account at least once a week isn’t a way to forecast your cash flow.

Small-scale business owners who are overwhelmed by the idea of making an annual cash flow forecast typically believe that a quick glance at the bank account will do the trick.

It’s crucial for small entrepreneurs to be aware that cash flow forecasting is very simple and, instead of complimenting things, can make running your business easier and your odds of success greater.

Here are our top recommendations for cash flow forecasting like a pro.

1. Learn about cash flow

Put simply the cash flow calculation is based on your payments out and in - what you are owed and have on hand in cash, less the amount you are owed.

Cash flow estimates can give you an exact estimate of how much you have in the way of liquid funds available.

The money you pay in will predominantly comprised of sales. However, your payments out will include expenses such as rent, wage, taxes, as well as supplier payments.

2. Learn why it’s important

If you have a grasp of your cash flow, you are able to run your business more efficient and effectively.

Many small-scale businesses have stocks, and they need to know what they need in their inventory and whether they can purchase in bulk, for example.

If you’re not planning your cash flow properly it will be difficult to control your inventory in the bank or make the most of an opportunity that occurs – like for instance, a price reduction on an order, for instance, or being able to purchase a brand new asset.

The cash flow outlook could help you understand whether capital expenditures are feasible and warranted at any moment and assist in utilizing your funds to their fullest potential.

3. Be ready for growth

As you begin your journey in business and grow, the changes that come from growth may sneak over you, including the shift between being in a position to maintain your business ticking over simply and then needing to keep watch on fluctuations in cash flow.

It’s critical to plan ahead. For instance, if you’re not managing your cash flow, you could run running out of stocks and be able to purchase. I’ve also seen corporate owners finance stock purchases using personal credit cards. This can be a costly cycle that’s very difficult to escape from.

Planning is crucial for the accuracy of financial forecasting.

Think about things like the need for extra staff, or the seasonal demand for stocks. And don’t forget your taxes, which include GST and PAYE – that’s one expense area that small-sized businesses are caught every now and again.

4. Pay your bills with cash

It is recommended that small-scale business owners pay their invoices as soon as possible.

It isn’t easy to get back a late payment. Chase the invoices that are not paid immediately instead of taking them off.

Invoices that are not paid can have a serious impact on your business, affecting everything from replenishing stocks, to having to reduce the budget for advertising and branding.

Make sure you know what you’re due by checking the cash flow projection frequently Every week is ideal and once per month at minimum. If you’re not aware of what’s happening it’s difficult to think about what’s to come.

5. Are you feeling stuck? Don’t go it alone.

The majority of accounting software such as Xero and MYOB offers the capability of forecasting cash flow that business owners can use. While it’s beneficial for business owners to stay in control on their money flow themselves There’s nothing wrong with having a monthly report with your accountant in the process.

Small business owners are busy enough – sometimes their time can be better focused on other aspects of their business. Accountants can assist them in planning their forecasts. Talk to your bank accountant or small business lender to find solutions to small business growth issues before they become an issue. It is better to seek help as soon as you think you might need it instead of burying your head in the sand hoping the problems will go away.

It doesn’t require an accountant to prepare or manage a cash flow forecast. However, you must ensure it is a regular and constant part of your business’s planning. During uncertain times like an epidemic that is spreading across the globe is more crucial than ever before for small business owners to incorporate resilience into their companies and one of the most effective ways to do this is cash flow forecasting.

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