Success in today’s business climate sometimes requires you to push aside your passion for your business and spend time sorting out your finances – not a pleasant thought! But not to worry, we’re here to help.
Did you realise that a major part of managing your finances can be taken care of using one very simple tool – a cash-flow forecast, don’t mistake this for a budget as it can be much more powerful.
This report can be done annually or ongoing and will help you see whether your anticipated income will be able to cover your projected expenses. It will also help you:
- realise and understand when cash is available
- plan and prepare for expansion, stock control and taxes
- analyse and anticipate key expenses
Software packages can be purchased to help you generate a report. If you’re not sure where to start, start with us. We’re here to help, it’s especially easy if you’re using Xero or QuickBooks Online. At Business Edge Accountants we can help generate it and even deliver additional custom reports if required on a basis you and your business need.
Cashflow Management Coaching
Cashflow planning is best practice in any business and critical to survival and growth. Our Cashflow Management service is designed to help you improve your Cash Conversion Cycle and maximise your cashflow. It will allow you to predict large cash outflows and respond to changes in your business.
Managing cashflow is all about your business processes. After preparing a Cashflow Forecast we’ll conduct a thorough review of your processes and identify any potential causes of poor cashflow so that we can treat the underlying issues.
We’ll meet with you on a quarterly basis to monitor, analyse and adjust your key cashflow drivers. Acting as your accountability coach, we’ll help you set annual goals and devise a 90 Day Action Plan to ensure you implement improvement strategies for maximum results.
Financial Awareness Coaching
We’ll help you to understand your business better, enabling you to better manage your cashflow. Good management decisions rely on a sound understanding of the financial implications for your business. This service involves meeting with us every two months to discuss your financial results, culminating in you learning to produce and interpret your own customised financial reports on a monthly basis.
Or, you could tailor make your own with a little extra work and even some assistance.
Here’s a simple method to forecast & do it yourself
Step 1 – Create a cashflow forecast spreadsheet
Using a spreadsheet, create a table with appropriate headings. Choose the length of time over which you want to run your report and the periods within that time. For instance, you may want the report to show monthly amounts covering the next one or two years.
Head up the first column ‘Cash Movement’ and across the top of the table enter the months of the year as the next column headings, like this:
Cash movement January February March
In the first column, insert a heading entitled ‘Income’ and beneath that heading detail each source of income. Add a row at the bottom for the subtotal.
Then insert a heading ‘Expenses’ and itemise each expense under that heading. Set up a subtotal at the bottom of this group.
Next enter a row which shows the total of the income rows minus the total of the expenses rows for the month.
Finally, insert a row for your running total. In this row, add your profit or loss for the period to the previous running total and this will show your financial position at the end of the period.
Your table should start to look like this:
| Cash movement | January | February | March |
| Income | |||
| Sales of A | |||
| Sales of B | |||
| Subtotal | |||
| Expenses | |||
| Rent | |||
| Telephone | |||
| Stationery | |||
| Subtotal | |||
| Monthly total | |||
| Running total |
Step 2 – Input the data
Using your accounting records, enter your actual income and expenses in the applicable columns. Also, estimate and include any projected expenses in the coming months. Be realistic – don’t overestimate income or underestimate expenses.
When all your information has been entered, it should be easy to see where your money is coming in and where it’s going out:
| Cash movement | January | February | March |
| Income | |||
| Sales of A | 11,000 | 9,000 | 10,000 |
| Sales of B | 9,000 | 10,000 | 8,000 |
| Subtotal | 20,000 | 19,000 | 18,000 |
| Expenses | |||
| Rent | 2,000 | 2,000 | 2,000 |
| Telephone | 350 | 300 | 260 |
| Stationery | 125 | 90 | 200 |
| Advertising | 800 | ||
| Subtotal | 2,475 | 2,390 | 3,260 |
| Monthly total | 17,525 | 16,610 | 14,740 |
| Running total | 17,525 | 34,135 | 48,875 |
Cashflow forecasting can also be used as a budget planner. For example, you may know your rent will be increased at the end of the year, or that you’ll have numerous bills to pay next month. So you can make sure you keep enough funds in your bank account to cover these expenses.
Your report will also indicate if you can afford to make an investment in your business; whether that means buying some new equipment, paying for staff training or an advertising campaign.
Step 3 – Update regularly
Once you have completed your cashflow forecast, it’s important to keep it up to date. That means revisiting it regularly, say once a month, so that you’re always aware of how cash is flowing through your business. Ideally, you want to be in the position where you can control your finances, and step in and take action if necessary, so that you have enough cash to take care of all your expenses.
The benefits
An annual cashflow forecast will give you all the information you need to keep on top of your business financially.
You’ll have a clear vision of where and when you may need to cut back on spending. At the same time, it will highlight some potential areas where you can invest that little bit extra.
Not only that, once your cashflow is on track, you won’t need to lose sleep worrying about meeting your expenses and the everyday running of your business. You’ll have more time to do what you do best and enjoy your business!
What do you do now?
- Ask us about helping set one up for you.
- Get updates monthly and ongoing support or,
- Take the time to set up a cashflow forecast spreadsheet like above.
- Input as much financial data as you can.
- Diarise a reminder to update spreadsheet regularly.
If you need help or want to know more, ask your Business Edge Accountant who’ll be happy to help.
Contact the team today on [telnumlink]02 6041 1687[/telnumlink] for assistance.