Your compass to cashflow answers

The Ultimate Guide to your Cash Flow Forecast

22 April 2015

Everyone tells you that having a cash flow forecast is really important, but why? How do you manage it and what does your cash flow forecast even tell you?

If any of these questions sound familiar, keep reading.

This blog post answers all of these questions and more.

What is cash flow forecast?

Let's start at the beginning; a cash flow forecast is a projection of your cash flow. This is different to what your accounting software tells you. Accounting software shows you what has happened in the past and if you are a profitable business. This is very important information but it doesn't help you make plans for the future or see potential problems before they happen.

So, a cash flow forecast shows you the cash coming into and out of your business on a daily basis with the difference being your cash flow. Being able to forecast this is essential if you are going to operate as a proactive business and remain competitive.

What you'll need to hand

To start your cash flow forecast you will need the following figures to hand:

These are the basic pieces of information you'll need to initially create your cash flow forecast. Once you've inputted these figures for the first time, you will only need to change them as your regular incomings and outgoings changes such as an increase in sales or supplier costs. Many of the figures remain stationary and will only need updating as your business grows.

Once you have all of this information to hand, visit our cash flow forecasting tool to start your FREE trial of our cloud-based forecasting software. You can enter all of your figures and start seeing what the future looks like for your businesses cash flow, profit and loss and where your break-even point is.

Understanding your cash flow forecast

Once you have generated your cash flow forecast, you'll need to be able to understand and interpret the information it is showing you.

Our forecast dashboards have been developed alongside entrepreneurs and start-ups to ensure they are clear and easy-to-read. We have built in visual insights and performance indicators so you can see, at-a-glance, how your cash flow is looking.

The important things to look out for from your cash flow forecast are:

Our cash flow forecasting tool allows you to drill down into the numbers behind your cash flow forecast so you can easily identify what the problem is. Equally, you could find that your business is going to experience a surplus cash in the coming months and this could provide your business with some new opportunities.

Fore warned is fore armed and if you know what's coming for your business, you will be in a much better place to either take advantage of it or put precautionary measures in place.

Review your cash flow forecast regularly

This is an important factor of having a cash flow forecast. Reviewing it regularly will allow you to keep it up-to-date and help you review previous activity and plan for future activity within your business.

Cash flow can change quickly, especially in a small business, so it is a good idea to review your cash flow forecast on a monthly basis, as you would with your other financial performance indicators.

This will allow you to update your forecast and evaluate the impact those changes might have on the wider business context. Remember: Your forecast will only be useful if it is up-to-date and evaluated regularly.

Forecast different scenarios

So, you have created your cash flow forecast, you evaluate it regularly and keep it up to date giving you information to base your future decisions on. But cash flow forecasts are not one dimensional, our forecasting tool allows you to forecast different scenarios allowing you to compare the impact of different decisions on your cash flow.

Take the risk out of decision making and forecast the future with FINANSCAPES forecasting tool.

Publish your forecasts

There will be times in your businesses future when you need to produce forecasts for bank managers, mentors or other investors or lenders. Wouldn't it be great if you could, at the touch of a button, securely publish your forecasts to these people so they are looking at the same information as you are? Demonstrate your fiscal management abilities to your funders and share your businesses future with them.

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