Have you come across the term cashflow forecasting whilst skimming through business material? Maybe you have heard about it and thought to yourself that it’s pretty important but I don’t have time to look into it now?
Typically, a cashflow forecast shows your bank balance at the beginning of the period, the money you expect to come in, the money you expect to go out and then your final bank balance at the end of the period.
It gives you a chance to see periods in the year ahead where cash may be tight and periods where you may have extra cash on hand. Instead of flying by the seat of your pants, you can make more informed decisions about when to make your more expensive purchases or when you may need to look for additional finance.
For example – maybe you have kept an eye on your Profit & Loss Statement and your business is making a profit, however you don’t seem to have much cash on hand to pay your bills. You may have been spending money on capital items, have had to pay GST owed to the ATO or have large amounts of outstanding customer invoices – these transactions aren’t reported on your Profit & Loss Statement and are easily overlooked when trying to figure out where your money is going!
Reckon and MYOB both have cashflow forecasting tools. Otherwise a spreadsheet will also do the job. If you have been in business for a while you can use figures from the previous year and build on those.
If you would like to read more cashflow tips, click on the link to my previous article 14 Cashflow tips for small business.
Do you use some form of cashflow forecasting in your business – maybe the MYOB or Reckon tools? What do you think of them – I’d love to hear your thoughts.