A quick guide to cash-flow forecasting

Posted on: 2 Apr 2025 at 09:39 am

At a glance:

Controlling cash flow doesn’t have to be complicated, but it requires more than just a few glances at your bank account for business.

Controlling the flow of cash lets you benefit from lucrative opportunities – think buying a new asset, employing additional staff, or taking advantage of the discount.

When you pay on time, it is critical to maintaining cash flow so don’t let your debtors get in the way.

Heads up: looking at your bank account at least once a week isn’t a way to forecast your cash flow.

Small business owners overwhelmed with the thought of creating the cash flow forecast typically believe that a quick glance at the bank account will accomplish the task.

It’s important for small business owners to know that forecasting cash flow is simple and, rather than complicating things, it can to make managing your business simpler and your odds of succeeding higher.

Below are some of our best tips for forecasting cash flow as a professional.

1. Know what cash flow is.

Simply put the cash flow calculation is based on your payments out and in that you owe and what you have in the bank and what you have on hand, less what you have to pay.

The cash flow projection will reveal exactly how much you have in the way of liquid funds.

Your payments in will be mostly comprised of sales, while your cash outs will also include costs like rent, wages, tax and utilities as well as supplier payments.

2. Learn why it’s important

If you are in control of your cash flow, you can manage your business more efficiently and profitably.

Many small-scale businesses have stocks and must know how much they should have on hand and whether they can purchase in bulk, like.

If you’re not forecasting your cash flow correctly, you won’t be able to manage your stock available or take advantage of a good opportunity when it arrives – such as for instance, a price reduction on an order like that or the possibility to purchase a new asset.

The cash flow outlook will provide you with an understanding of whether capital expenditure is possible and is warranted at any time, and help use your funds to their greatest potential.

3. Be ready to grow

As you begin your journey in business, the changes that come from growth may sneak up on you – including the transition of being capable of keeping the business running without much effort and not needing to keep watch on fluctuations in cash flow.

It’s critical to plan ahead. For instance, if you don’t manage your cash flow, you might end up out of stock and not in a position to purchase. I’ve also witnessed people who finance their purchase of stock using personal credit cards. This can result in a high-cost cycle that is difficult to escape from.

Planning ahead is essential in the process of accurate planning for cash flows.

Think about things like the requirement for additional staff, or the seasonal need for stock. Be sure to take note of your taxes, which include the PAYE and GST. That’s an area where small businesses get caught out by time and time again.

4. You can use the Chase option to make your payments

It is recommended that small-scale entrepreneurs collect their payments for invoices as soon as they are able to.

It can be very difficult to get a payment that is not paid. Chase unpaid invoices immediately instead of let them linger.

Invoices that aren’t paid can sometimes have a serious impact on your business, and can affect everything from the ability to replenish stocks to having to cut back on the advertising budget or branding.

Find out what you’re owed by reviewing your cash flow forecast every week Every week is ideal and once per month at a minimum. If you don’t know where you stand and how they’ll change, it’s impossible to make a proper plan for what’s ahead.

5. Feeling stuck? Don’t try to solve it on your own.

A majority of accounting software, such as Xero and MYOB provides the ability to forecast cash flow, which business owners can benefit from. Although it’s recommended to keep business owners on top of their cash flow themselves but there’s nothing wrong with having a monthly report with your accountant part of the process.

Small business owners are too busy – often their time is better to be spent on other aspects of their businesses. Accounting experts can assist them in planning their forecasts. Contact your bank’s accountant or small business loan provider to find solutions to small business growing pains prior to them becoming a problem. It’s better to get help when you realize you might need it instead of burying your head in the sand hoping the problems will go away.

It doesn’t require an accountant to develop or oversee the Cash flow projection. However, you must make it a frequent and consistent part of your business planning. During uncertain times like the global pandemic, it’s more important than ever before for small business owners to incorporate resilience into their businesses and among the most powerful ways to do this is cash flow forecasting.

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