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6 Golden Rules of Cash Flow Forecasting

By December 8, 2016May 26th, 2022Blogs

Having cash in some sort of order is the penultimate element of having a successful business. Without cash flow forecasting your profitable business could be in disorder. Follow the 6 golden rules of cash flow forecasting here with Coleman and Co and get in touch for assistance.

1. Be level-headed

In some cases, you need to be pessimistic about your finances and the state they are in. Never be over assumptive and remember that a cash flow forecast is not worth the paper it is printed on if it is incorrect. There is no use having your head in the clouds when your fianncial state is not, so work with our team to ensure you are on track and heading towards profit at the end of the year.

2. Include everything

Don’t cut corners and don’t miss out information you think isn’t necessary. Every single piece of your cash flow is important to your forecasting and needs to be included. If there are any missed receipts or payments, it could seriously hindrance your forecasting and hold you back financially further down the line.

3. Learn the difference between ‘income’ and ‘cost’

Tip 1 – An invoice is not an income. Tip 2 – An expense is not a cost.

The whole process of cash flow forecasting is the analysation of money entering and leaving your account. One example of this would be getting an invoice issued at £100, but it is actually received in 90 days, therefore you have 3 months until you actually receive the £100. It also works the other way around. If you were to buy a product, but use a credit card, the financial impact will not be immediate. Learning the difference between these two will help with forecasting.

4. Be prepared for everything

Cash flow forecasting is majority guesswork as you can never really know how your year will go. With sales, income, expenditure and bills you never know what the amounts will be, but you can guess! One way to work around this guesswork is to take into account every possible scenario that could happen. The good, the bad and the ugly, just in case the worst does happen.

5. Take into account variable and fixed rates

It pays to look at which costs are fixed and which are variable.

Fixed – Utility bills, broadband, rent etc
Variable – Heating, electricity, business mileage, stock etc

As you can see the fixed rates are the usual bills you expect to stay the same all year but the variable rates may differ from season to season and from week to week. It is vitally important to remember that if you are predicting your future in sales and costs terms, that it may affect other areas such as stock and business mileage.

6. Seasons may change and so will your finances

As the seasons change and your finances follow suit it is important your cash flow forecasting include this into the reports. In certain seasons, certain businesses thrive and others may fail so learning the pattern of your business is vital.

If the main proportion of your sales happen in winter around Christmas (e.g. you sell wrapping paper) then a reliable cash flow forecast will help you plan stock, finances, sales and expected profits way before the season arrives. The forecasts also allow for contingency plans and to safely manage your finances throughout the whole year when income may be at its lowest.

Coleman and Co

Coleman and Co work with all clients to ensure safe cash flow forecasting in order to plan your future as a business. As it is vital all business project their cash flow forecast professionally, our team work to produce reports that prevent company failures, debts and liquidations.

Taking into account out going payments, income profits and other expenditures we are able to forecast your business financial future and make amendments when needed. Our cash flow forecasts are between 3-6 months but in certain situations we prolong the time period if there are no other outgoings like loans etc.

Get in Touch

For more information and to find out more about cash flow forecasting, call us on 028 9266 3599.

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