Managing Cash Flow is an Exercise in Forecasting
Proper cash flow management can be the difference between whether your business succeeds or fails. Many small business owners tend to think about it every so often or only when there’s a problem. Simple forecasting can help keep the business owner from getting backed into a ‘cash flow corner’.
The easiest way to look at cash flow forecasting is to start with the bank balance. Then take into consideration the bills that are coming due. These should be in a file or they can be easily viewed in your accounting software. Also take into consideration the cash that will be coming into your business. This is where there’s some guesswork involved because it’s not always easy to predict sales.
However, after you have run your business for awhile you should have a feel for what to expect for cash inflow. It just takes some practice and discipline; the more often you can look at the cash flow, the more adept you will be at it. The better you are at this part and the further out you can visualize the balance between outflows and inflows, the better you will be at forecasting cash flow problems.
A cash flow problem 60 days out can be much easier to deal with than a cash flow problem bearing right down on you tomorrow! Make sure you have a Business Cash Advance option.
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September 22nd, 2007 at 3:21 am
I could not agree more. Here’s a poem I think fits this:
Though my bottom line is black, i am flat upon my back.
My cash flows out and my customers pay slow.
The growth of my receivables is almost unbelievable.
The result is certain - unremitting woe!
And I here the Banker utter an ominous low mutter
“Watch Cash Flow.”