5 Steps To Manage Cash Flow

Ever wish you had a crystal ball when it came to the future of your business’ finances?

Something to answer questions like:

“Can I afford to hire 2 part-time employees during my busy season this spring?”, or

“When will I have enough money to pull the trigger on that expensive new piece of equipment?”

Now, we don’t exactly have a crystal ball – but we do have the next best thing:

𝙲𝚊𝚜𝚑 𝙵𝚕𝚘𝚠 𝙵𝚘𝚛𝚎𝚌𝚊𝚜𝚝𝚒𝚗𝚐

𝗪𝗛𝗔𝗧 𝗜𝗦 𝗜𝗧?

Cash flow forecasting is a way of using your past and current financial history to estimate your future cash flow in your business.  

You can forecast any range of dates, from short-term, 30-day forecasts to long-term, 1 or 2-year forecasts.  (Keep in mind – short-term forecasts are more reliable than long-term ones!)

𝗛𝗢𝗪 𝗗𝗢𝗘𝗦 𝗜𝗧 𝗪𝗢𝗥𝗞?

𝗦𝘁𝗲𝗽 𝟭: 𝗚𝗲𝘁 𝘆𝗼𝘂𝗿 𝗳𝗶𝗻𝗮𝗻𝗰𝗲𝘀 𝘂𝗽 𝘁𝗼 𝗱𝗮𝘁𝗲 – After all, how can you predict the future … if you don’t even understand the present??

𝗦𝘁𝗲𝗽 𝟮: 𝗥𝘂𝗻 𝗳𝗶𝗻𝗮𝗻𝗰𝗶𝗮𝗹 𝗿𝗲𝗽𝗼𝗿𝘁𝘀 – Specifically, your cash flow report and your P+L report. Make sure you include at least a full year of business data!

𝗦𝘁𝗲𝗽 𝟯: 𝗔𝗻𝗮𝗹𝘆𝘇𝗲 𝘁𝗵𝗲 𝗺𝗼𝗻𝗲𝘆 𝗰𝗼𝗺𝗶𝗻𝗴 𝗶𝗻 – Look for patterns in the past and apply them to the future. Will I have the same clients, and projects, for the foreseeable future?  Will I sell assets, take out loans, or receive grants?

𝗦𝘁𝗲𝗽 𝟰: 𝗔𝗻𝗮𝗹𝘆𝘇𝗲 𝘁𝗵𝗲 𝗺𝗼𝗻𝗲𝘆 𝗴𝗼𝗶𝗻𝗴 𝗼𝘂𝘁 – Again, look for patterns in the past and apply them to the future. Are my regular expenses going to stay the same – or increase?  Do I have any large one-time expenses to account for (like equipment purchases, accountant fees, etc.)?

𝗦𝘁𝗲𝗽 𝟱: 𝗙𝗼𝗿𝗲𝗰𝗮𝘀𝘁 𝗮𝘄𝗮𝘆! – Now, take everything you learned and project it out over the next 1, 3, or 6 months!  And then you’ll have a solid foundation of data (𝘢𝘭𝘮𝘰𝘴𝘵 as good as a crystal ball) to answer your future budget questions

Sidenote: this process can also help you spot and solve problems in the present, too – like high expenses or a negative cash flow!

What about you?  Have you ever used cash flow forecasting in your business?  Or do you just “wing it” when making new purchases? 

Let us guess … you liked that crystal ball idea, but we lost you the moment we used that financial jargon-sounding term of “cash flow forecasting”, right?  

If that’s you, then no worries! 

Most of our clients don’t understand this process either … because they hired Abacus Business Solutions to handle it for them! 

So if you want some help predicting the cash flow in your business – just reach out! Our A-Team would love to help.                                

www.chooseabacus.com • info@chooseabacus.com • (352) 432-8104