Cash flow advices. Why forecasting monthly is so important

cash flow

In this article I want to share with you my knowledge about cash flow, its forecasting, and why it should be done monthly.

Cash flow forecasts will help you to understand how much you have; how much you have spent and if you have enough to fund the priorities of your business. If you can predict some scenarios you can easily set up a strategy to avoid the worst. For example, to be proactive you can agree better conditions for some contracts or offer pre-paid contract to your clients to obtain cash upfront.

Many of my clients say they don’t forecast their cash flow because the forecasts are often inaccurate. Let’s have a proper look on possible issues and how you can improve the situation.

1. Using adequate resources

You must implement robust data along with the proper tools and resources to manage and monitor the financial situation in your company. Remember, that in order to provide an accurate picture of where the company stands a spreadsheet is no longer allow you to draw data instantaneously from accounts. Consider that employees may not have the time for accurate data collection and its analysis. Also, most companies don’t have a standardized system or methodology to forecasting revenue or for collecting and reporting on required data. But if you find a perfect system or hire specific group of people to develop it could be a great solution for your business.

2. Proper communication between business segments

Proper communication between departments has a crucial role. If each department has its own system for collecting and predicting cash flow, each may produce a slightly different outcome. Find time to develop proper criteria to follow and collect the data.

After all these issues solved you will be able to predict cash flow levels and — more importantly — predict if the company runs the risk of running out of cash. How do I predict this risk? I usually look to current sales forecast, and then project the numbers with 10% more sales and 10% fewer sales.

Do you have any issues with cash flow prediction in your business? Do you consider it important? If you have your question, please write it below, I would be glad to answer your questions or to introduce your project to my team at Astorts Group to be evaluated