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How To Create An Accurate Cash Flow Forecast

By October 8, 2019Forecasting

Creating a cash flow forecast is beneficial for every business. With a cash flow forecast, you will have a good understanding of your future finances and what budgeting is required to achieve your financial goals. To do this, your financial forecast must be accurate and effective.

Coleman & Co can create a cash flow forecast for every business. Working throughout Lisburn and Northern Ireland, our services are always available at a very competitive price.

Prepare Your Expected Income

As an established business, estimating your predicted income can be based on the sales figures of previous months or years. Although your business may have changed considerably, sales figures can still be based on previous performance and how your sales forecast may improve or decrease for the coming months.

Based on past trends, the income you gain from business sales should usually be accurate. Some errors may be made, however, this will give you a good overview of the basic income you expect your business to achieve. For new businesses who can not use previous data and statistics to create an expected cashflow, an accurate cash flow forecast can still be made. By estimating the cash outflows you will have to deal with, you know how much must be made to cover your costs.

This will be the minimum expected income for your business so you are breaking even. Your expected income is never set in stone and can fluctuate due to many factors. However, gaining an insight into the incoming cash flow will give you a good understanding of what your business should be achieving each month.

Other Cash Flow Sources

In addition to your expected sales, there may be other areas of cash flow sources that you should consider. Some of the extra income could be unexpected and therefore there is no way to include it in your cash flow forecast. However, you can consider some factors where income will increase, including:

  • Business Investment
  • Grants & Loans
  • License Fees
  • Repaid Loans
  • Royalties
  • Selling Assets
  • Tax Refunds

If you are expecting any of these to add to your income, make sure you include them within your cash flow forecast. You know what your income sources are and can separate the income you receive from sales and other income sources.

Detail All Expenses

Calculating your cash outflows will not only help you create an accurate cash flow forecast, this will also be ideal for creating a business budget. Your budget can be used to spend less than what you expect or just prevent costs going overboard.

Before the month begins, make sure you know all the expected transactions to come out of your business cash flow. This could include:

  • Bank Fees
  • Buying New Assets
  • Day-to-Day Costs
  • Investment
  • Loan Repayments
  • Payments To Owners
  • Payroll
  • Purchasing Resources & Equipment

Unexpected payments may have to be made and this is why a budget is important. Map out the payments you know about and create a budget so spending does not increase for your expected payments. With a budget, this should help you make larger profit margins and therefore cash is leftover. If an unexpected payment does occur, your budget will save you money for emergencies.

Combine Costs & Income

To make your cash flow forecast and maintain its accuracy, the final part is to put together your income and costs. Therefore, when income and costs have been detailed correctly, your cash flow forecast will be accurate, excluding any unexpected payments.

Having a cash flow forecast is important, not only to see how much profit you should be making each month but to find where costs can be reduced and if you need new areas of revenue.

Contact Us

For more information regarding the services available at Coleman & Co, speak to our team today. We can help all clients throughout Lisburn with a cash flow forecast, ensuring you are effectively planning for your business’ financial future. Make an enquiry and call 028 9266 3599 or fill in our contact form today.

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