Cash flow forecasting

Cash is king

The old adage is revenue is vanity, profit is sanity and cash is king.

Having a good grasp of your cash flow is such an essential thing for any business owner. Accurate cash flow modelling can help business owners avoid potential traps, ensure the bills are paid and help plan for tougher times ahead.

Maybe you are contemplating whether you can afford that extra hire, or you are trying to identify where your cash is tied up each month. If you can understand your cash flow, it can make a huge difference. It will simply reduce your risk of failure and point you to where to focus.

Our cash flow modelling process

For once, we don’t advocate the use of cloud software for a cash flow. The reason being is we have found no one solution can deal with every nuance of a business to plan accurately. That is why we will hand-build your own personal cash flow model in a spreadsheet, designed around your Business.

We start by working with you to understand the cash flows of your business. How do you make your money, how do you get paid, what are your terms, what terms do your suppliers give you, loans, interests, taxes, staff. We examine everything going in and out of your bank account.

We then will plot ahead using trends, analysis or projections as seen fit to forecast your cash flow over the time ahead. Whilst expenditure can be predicted with some certainty, as it is something you control, revenue always remains tricky. We can work either with modelling out a customer pipeline, or projected rates of growth. Not sure what to do? We can come up with a few solutions for you.

We usually recommend a highly detailed 2-3 month forecast, but we can go further ahead if need be. It will be designed for you and your business, with easy to edit assumptions and jargon-free language so you can get to the facts quickly. We talk you through the model, give you our expert observations and can set you on your way on some recommendations. It could be that you might benefit from refinancing or holding off on the purchase of another van and instead would sooner benefit from a lease.

We can then get more sophisticated and build in scenarios. What does the worst case look like? What is the dream scenario? Having a range like this is powerful too and gives you an unprecedented ability to plan whatever the situation.

One-time or refreshed?

We can always pull together a cash flow forecast for a one-time view, but the only downside is that it will inevitably change and a month later you will have new knowledge and a different cash balance to work with. Therefore some of our clients will adopt quarterly or monthly cash flow reforecasts, so they have an accurate picture all the time, updated by us, with our commentary.