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Managing your money

Get started with cashflow forecasting: basic steps to measurement

54% of small businesses say cashflow problems are their biggest obstacle to growth. Without a steady balance of revenue and expenditure, it’s difficult to plan ahead, cover the costs of expansion or even create a stable financial model for the company.

So how do you start tracking, measuring and forecasting your cashflow position? And what are the important numbers you should be monitoring to keep your cashflow positive?

Here are 6 ways to get started with your forecasting today…

1. Track your revenue and income

With the latest cloud software, it’s incredibly easy to keep track of your revenue and to get a real-time view of your important financial numbers.

Platforms such as XeroQuickbooks and Sage provide you with real-time data and and absolutely current view of your main financial numbers. By integrating your cloud accounts with one of the wide range of add-on reporting and forecasting apps, you can easily see a complete breakdown of the cash coming into the business and the revenue you’re making as a company

So track your income day-by-day and stay in control of this cash pipeline.

2. Keep an eye expenditure and costs

Positive cashflow is all about your cash inflows being higher than your cash outflows – in other words, it’s about balancing the money coming into, and money going out of, the business

To help you do this, you need to keep a very clear eye on your expenditure. By customising the coding of your Chart of Accounts to track specific expenses, cost of sales and overheads, you can monitor these numbers and aim to keep them as low and efficient as possible.

So track your costs and review them regularly to reduce your overall expenditure.

3. Manage your aged debtors level

Your ‘aged debtors’ are the customers who owe you money – the ones who haven’t settled your invoices on time and will appear on your outstanding invoices reports.

Getting paid on time is crucial for positive cashflow, so monitor any late invoices and be proactive about chasing for payment. Establishing a credit control procedure within the business will get you proactive with debtor management – and will help you to reduce your aged debt.

Stay in control of your aged debtors, and be proactive about chasing the late payers. Software such as Fluidly will distinguish your good and bad payers – allowing you to spot the issues, take action and keep the company’s cash in a positive position.

4. Project your cashflow forward

Having a real-time current view of cashflow has real benefit, but when you can project your cash position into the future, that’s has even greater value for your business success.

Automate forecasting of cashflow is a reality and helps you achieve that forward view. So use the latest cashflow tools to manage your cashflow position AND extrapolate your cash numbers forward to next month, next quarter or even further into the year.

Drill down into the weekly or monthly detail of your forecasts and get this quarter’s cashflow under control, or step back to see an overview of the whole 12 months down the line.

5. Scenario-plan your cash position

The course of your business journey can be unpredictable, but by looking at multiple scenarios when planning, you can see how different options bring different cash results.

The drivers that impact on your cash position can vary – whether it’s your price point, the size of your revenue target, or your planned aged-debt position. By reviewing each financial driver in your business model and projecting them forward through forecasting, you can see how changes in your financial strategy will affect cashflow.

Analyse each different scenario, look for the best outcomes and make the best possible business decisions for the future growth and profitability of the company.

6. Figure out your runway

Every business has its own particular ‘runway’ – the amount of time and available cash it has before the company fails to fly and crashes straight into the ground.

Whatever point you’re at in the business journey, it’s important to know this runway figure, but it’s especially pressing if you’re a startup or micro business with limited cash reserves. To keep in control of your runway, you need to know how many weeks of trading you have in the bank. And if the business is making a loss, having an exact date of when you run out of cash is vital for planning the amount of trading time is available to you.

Learn that runway, get in control of your cash position and give your business its best possible chance of success in the market.

Control your cashflow with smart technology

Cashflow can seem like a tricky concept to get your head around – especially if you’re not a financial expert. But with access to the latest in cashflow software solutions, you can quickly and simply get in control of your cashflow, and start making a difference to your finances.

With artificial intelligence (AI) driving the analysis, management and forecasting of your cashflow, you can be smarter and more proactive about improving your cash position – and that’s good news for any ambitious business owner with a desire to create a more stable and profitable business model.

See how Fluidly helps you make smart cashflow decisions


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