Do you know how much cash you’re going to have in 3 weeks? How about 6 weeks? Can you effectively run your business if you’re afraid you’ll run out of money?
Cash is King
Identifying a Cash Flow Problem
That old cliché, “cash is king” is the key to operating a successful business. How can you operate your business if your expenses exceed your available cash? Your expenses – inventory, payroll, insurance, rent, utilities, and all those other things that you make weekly or monthly payments for, need to be LESS than your cash receipts. That sounds obvious.
But unless you are working with a Cash Flow Forecast, how will you know that you will have enough money on hand to pay those bills? Understanding your cash flow will help you avoid the single biggest reason businesses fail – poor cash flow.
Best Use of Your Cash
Cash Flow Management
If you have bumped up against the top of your credit line, the solution isn’t a bigger credit line. That only kicks the can down the road. You need to manage the cash you have. Balance the cash you have against how much cash you need, and prioritize your spending. Push off payments, accelerate receipts. Only purchase necessities. Manage the cash that you have.
Cash Flow Forecasting
The #1 tool for creating sustainable growth and profitability.
- Helps you manage spending
- Gives you realistic cash availability forecasts
- Identifies potential cash shortage issues
- Pinpoints cash flow problems before they happen
- Helps you stay profitable
- Makes the bank happy
The best Cash Flow planning tool is the 13 Week Cash Flow Forecast. This is a complex set of spreadsheets that show the planning for every payment that you need to make, and every payment you’re going to receive. The greater the detail of the forecast, the more accurate it’s going to be.
The reliability of your cash flow report forecast is only as good as the accuracy of the data you use – expected cash receipts, operating expenses, payroll and other cash obligations will show you whether you have enough to cover your obligations.
Any forecast needs to be monitored and updated. The Cash Flow Forecast is no exception. Tracking all the elements can be complex, and it should always be matched to the actual results for the prior period so that you can fine tune your results. This isn’t for the faint of heart.