What is Cash Flow Forecasting and Why Is It Important?

cash flow management and cashflow forecasting

Cash flow forecasting, also known as a cash position forecast, is a way of estimating the flow of cash coming in and out of your business, across all areas, over a given period of time. A cash flow statement shows your projected cash based on income and expenses and cash flow forecasting models are an extremely important tool when it comes to making decisions about activities such as funding, capital expenditure and investments. A cash forecasting process can be carried out for a range of time horizons. A short-term cash forecast may cover the next 30 days and can be used to identify any funding needs or excess cash in the immediate term. A medium-term cash flow forecast may cover between one month and one year ahead, while a long-term forecast will be used to look at sales and purchases further into the future – between one year and five years ahead or even longer, depending on the nature of the business. The longer the time horizon of a cash flow forecast, the less accurate it is expected to be. If you don’t understand the importance of cash flow, it makes it almost impossible to make informed business decisions, plan for change and know how you can enable business growth. If you’re asking yourself ‘what is cash flow forecasting’, then contact Spartan Accounting Group today so we can help you.

Cash Flow Forecasting Tools And Systems You Need

Cash flow forecasting enables a small business owner to differentiate between two valuable financial metrics – profit and cash flow. Knowledge of their current and future cash position forecast is essential for any business owner to know how much cash is available in the bank at any one time, under any given scenario. But forecasts in a spreadsheet can be difficult for non-financial people to get to grips with. So, with a collaborative cloud-based system and cashflow forecasting tools, together with the knowledge from your small business accountant, you can go a long way toward calming fears, and soothing sleepless nights. Taking things up a notch is where advanced cash flow forecasting comes in. This is a more precise and accurate cash forecasting process where additional steps can be taken. Such as taking into account factors like historical trends and prediction patterns and using this data to create a more accurate and informed forecast. Predicting when your clients will actually pay their invoices based on historical data. Accounting for different ‘what-if’ scenarios and possible changes in your business. Considering external factors such as a change in commodity prices or exchange rate which may affect the pricing of components needed to operate your business.

cashflow forecasting

Benefits of Cash Flow Forecasting In Your Small Business

cash flow management

Cash flow forecasting is a process in your business that can’t be overlooked. The benefits of cash flow forecasting tools are endless, and every business owner must understand the importance of cash flow in their business. Properly projecting businesses cash flow is as essential as creating an effective mission statement and living up to it. Spartan Accounting Group has a team of accountants who will be able to help you develop an organised cash forecasting system with effective cash flow forecasting models that allow you to adjust your operations in ways that help you survive shortfalls, as well as improve receivables and manage payables. By generating a cash flow statement, which is basically a record of the cash that has gone into and out of your business over a period of time, you might be able to highlight issues that need attention. A cash flow statement might also contain patterns that will help make necessary changes to your advanced cash flow forecasting. So, whether your business needs cash flow forecasting tools or a cash forecasting system, Spartan Accounting Group has expert accountants on board to tackle your cash flow needs. Contact us today and let us help you simplify your cash forecasting process to benefit your business as a whole.

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