Forecast Your Cash Flow

by Karen Stern

April 15 has come and gone, and now you’ve turned your focus on tax planning for 2014. To successfully implement that plan, you most likely need to do some cash flow forecasting!  

Cash flow forecasting is a powerful tool to help you plan and manage future cash requirements and ensure your business has what it needs to survive and thrive. This process shows bankers and investors you understand how to strategically grow within your industry. While your projections may never be 100% accurate, make sure you update them on a regular basis. Here are some tips on setting up your cash flow forecasting:

Estimate how much money you will be bringing in weekly/monthly. This estimate can be based on your previous sales history. If you are a startup, decide how many sales calls, leads and appointments it takes to reach your projected weekly sales dollar goals.

Know the terms on which your customers will pay. Unless you collect cash or a credit card at the time of sale, you won’t always get the money as soon as you close a sale.

Estimate your fixed and variable weekly/monthly expenses. You can base these amounts on your previous year’s expenses. Pay particular attention to opportunities for improvements, such as sharing advertising costs with a neighboring business.

Save time and effort using forecasting tools. There are free cash flow templates available from the SBA and Office.microsoft.com. There are also forecasting apps, software and other tools that can be integrated with your accounting system, such as QuickBooks.

Get help! By including advisers in this process, you will be able to draw on a wealth of expertise and increase the accuracy of your projections.

With cash flow forecasting, you can proactively plan your way out of a shortfall instead of making damaging short-term decisions.

Karen Stern (314-983-1204 or kstern@bswllc.com) is partner in charge of BSW Small Business Services, which provides small business tax
and accounting services.