First things first; cash flow projections are good for any business.
Not only has getting funding and signing up new customers become more competitive but staying cash flow positive requires a bit more planning. Having a good idea of where you are going is important. So, here are my reasons why having good cash flow projections makes for good business.
1.Track whether spending is on target
Every business has revenue goals and targets that are time-sensitive. But cash flow forecasting can help a business owner to understand exactly when and if they will reach those goals.
Forecasting allows you to see the breakdown and impact of your budgeting. Whether over or under budget, seeing the movement of cash into and out of the business can help to increase the accuracy of future budgeting.
When planning future changes to your business, you need to understand the financial impact of your planned changes. Do you have sufficient funds? Will you have them at the right time? A cash flow projection will give you the information you need to make informed decisions.
When you approach your bank for a loan, provide them with a cash flow projection before they ask for it. Demonstrate that you have a plan to repay the loan and you are proactive and in control of your business. The forecast will not only clearly show your need for the loan, but it will also show when your income will be enough to cover your debt.
Sales are booming. New customers are coming through your doors and cash should now be starting to flow. But instead, the cash is flowing out. A business that’s growing can, in the short term at least, realize more money going out than coming in as it spends more with suppliers, rent, hiring of more employees etc. If your cash-flow forecast didn’t plan for success, your business could fail despite the increased sales.
If your business has seasonal fluctuations you must manage your cash flows. While your sales are varying in one cycle, the timing of your purchases is likely to vary differently. You need to purchase stock before the busy periods and often need to pay for it before it has been sold. Using cash flow projection software will allow you to plan your cash needs and avoid surprises.
If you need to improve your cash flow, there are many ways to do that. Let me help you do that…