Why Your Business Cash Flow Should Be Part of Your Budget Forecast
Including business cash flow in your budget forecast is a great idea no matter what stage your company is at.
No matter how innovative your products, how great your marketing, or how useful your executive dashboard, if you don’t have enough cash in the bank to pay suppliers or make payroll, it’s pretty hard to call your business a success.
When you’re preparing your budget forecast, measuring your business cash flow should be part of that process. Here’s why:
- Predict a cash shortfall. If you’re going to be short on cash, the sooner you know it, the better. The earlier you can identify a deficit, the more time you have to consider your options.
- Identify delinquent customers. A strong business cash flow forecast will help you source out the clients who don’t pay their bills on time, which can end up costing you more in the long run.
- Keep suppliers and employees happy. Your suppliers and employees need to be paid on time — plain and simple. A cash flow budget forecast will make sure you have enough money in the bank so none of your cheques bounce.
- More lending options. Many business lenders require borrowers to have a cash flow forecast ready. If you don’t, it may limit where you can secure a business loan and mean you have to pay more interest.
- See where money is leaving your business. Just like making a personal budget, creating a cash flow forecast can reveal surprising details about how your cash is being spent. You may find that you’re spending thousands on printer paper that could be used elsewhere.
Sometimes businesses avoid creating a cash flow forecast because they think it will take up too much time. You can make your cash forecast that much smoother with a few simple tips.
- Choose a frequency to update and review. If you’re on the edge of debt or in fast-moving market, updating weekly and forecasting for three months ahead can be a good time frame. If your business is more stable, you may be able to review monthly and forecast for six months ahead.
- Enter your current beginning balance of your company’s cash accounts and roll the ending cash balance each period.
- Pick software that makes the cash flow forecast process easy.
True Sky’s software can help you create a streamlined, easy-to-update business cash flow forecast that you can access at any time. Learn more about our product at www.truesky.com or by calling 1-855-878-3759.
