Monday, 22 June 2015

Who needs a cash forecast?

The Answer should be:  We all do!

Do you use a diary for your appointments and important things to do? Without a diary how would you know where you are meant to be and where you are going? Do you have a Cash Flow Forecast? No?

Well, it’s the same with a Cash Flow Forecast. Done properly and set up as the important planning tool it should be and you will wonder how on earth you managed beforehand. The truth…you didn't!

You will be amazed how useful it will be and how you will feel ahead of your own destiny. The term ‘Cash Flow Forecast’ is one that is trotted out and has lost some meaning. Each word is important.

‘Cash’ – This is not an Accounting exercise. Things like VAT belong in the CFF and the ‘bottom line’ (which is probably where it came from) represents the balance of your bank account.

‘Flow’ – This is not a Budget. that is a sum of money allocated to some purpose and divided by (say) 12 to show what is needed to save up perhaps or allocate in some way. The CFF gives you a flow of funds that reflects all the vagaries of business with seasonal variations and other cash ups and downs that you need to watch, including the quarterly VAT payment for example.

‘Forecast’ – it’s looking ahead. You can enter a planned sum of expenditure on equipment for example at a certain point and see if it works. Get it wrong on paper, it is much less damaging than getting it wrong in reality. The CFF will show you what expenditure is needed to support what level of sales and vice versa.

One last foundation stone: It is not to be left, once done. Re-do, review within 3 or 4 months and you will always have a plan for a year or two ahead. So valuable, you will wonder how you ever thought it was acceptable to do without.

If you think I'm talking sense but need some guidance?  Give me a call or drop me an e-mail, I'll be happy to help.

Bob Shepherd Associates - #BusinessBuilder - #BusinessIdeas
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