How to Use Cash Flow Forecasting to Grow Your Business Faster

To tell the truth: All your strategic plans and marketing tactics to grow your SME company will mean nothing if you won’t have enough funds to meet the needs of your daily operations and future financial obligations. Note that your cash flow is like fuel that keeps the engines of your business running, so without it, it’s impossible to operate.   That said, it’s critical to have sight of all your ins and outs, which is only feasible if you implement sound cash flow management and forecasting using a world-class and reliable financial solution tool Moolahmore.    Read on to find out about the basics of cash flow forecasting and the best practices for accurate cash flow forecasts so you can scale up your SME.  

Cash Flow Forecasting, Methods & Its Significance

    Simply put, cash flow forecasting refers to estimating your business’s future financial position—helping you manage your liquidity better and ensure that you have sufficient cash to pay expenses, continue operating and invest in growth opportunities.    There are two general methods of cash flow forecasting: direct and indirect. Thus, the main difference between these two is that the direct method utilises actual flow data. On the other hand, the indirect method depends on income statements and projected balance sheets.    To elucidate further, here’s a summary of what cash flow forecasting can do for your enterprise:

• Easily understand your current and future cash position and determine the potential cash shortfalls well in advance. With that, you’ll be able to avoid financial trouble. 
• Examining trends and potential situations allows you to make data-driven and well-informed decisions to manage risks and plan for your business’s future.
• Monitor late payments.
• Meet your tax obligations.
• Decrease your reliance on credit card debt and business loans since you’ll know and be able to confirm if you’ll have enough funds to cover your business operation costs (e.g. pay suppliers, meet payrolls etc.)
• If you really need to apply for financial backups relevant to your business expansion and growth, having an accurate cash flow projection can help you build your case for investments since you can prove you are eligible to pay back. Thus, you can also use cash flow forecasts to improve your cash flow position before applying for business funding, increasing your chances of approval.

 

Key To Accurate Cash Flow Forecasting To Quickly Scale Up Your Business: Significant Guidelines

 

1) Determine Your Inflows and Outflows

As business owners, getting up close and personal with your financial health is a must if you want your cash flow forecasts to be accurate. Of course, this involves knowing your business’s cash ins and outs.    Check out some of the usual items that count towards cash inflows.

• Revenue from sales (your company’s primary source of income)
• Sale of assets 
• One-time sales 
• Interest 
• New funding 

  While every business differs, let’s look at some common sources of cash outflows.

• Day-to-day business expenses (refer to your obvious expenditures, such as utilities, office supplies, rent, payroll, repayments and loan payments)
• Taxes 
• Purchase of assets 
• Other fees (e.g. payment processors)

 

2) Create and Run Several Scenarios – See the Good and the Bad

To get the most accurate forecast, it’s crucial to create and run several scenarios that illustrate both the good and bad outcomes of each decision. Doing this will give you a comprehensive overview of where your business stands, what direction it could take in the future, and determine the most effective course of action for your business’s long-term stability and success.   

3) Review and Adjust Results

What if your sales don’t materialise or sudden expenses show up on your doorstep—remember that circumstances can change, so no cash flow forecasts should be set in stone.    Therefore, we highly recommend you continue to keep an eye on your cash flow forecast results in real-time so you can also point out opportunities to enhance your process, which may allow you to leverage a better cash position on occasion.  

Where Moolahmore Sets In: An Expert Tool For Cash Flow Management and Forecasting

  Sure—you can forecast your cash flow in a spreadsheet. However, you should know that the process will be complicated and vulnerable to errors.    That’s where Moolahmore comes in! This fast, automated and innovative tool will enable you to forecast your cash flow without the hassle, stress and inaccuracy of spreadsheets. Instead, you can generate scenarios in minutes based on real-time data and edit transactions to visualise changes and opportunities.   On top of that, Moolahmore will provide you with an easy-to-understand visual presentation of your cash flow projections so you can plan ahead easily and confidently. Likewise, you can also share and collaborate with your team, stakeholders and advisors to keep everyone informed and aligned.    Moolahmore is truly the best expert tool for both cash flow management and forecasting!  

Conclusion

  Suppose you have a good handle on your finances and you are implementing cash flow forecasting with the help of Moolahmore. In that case, you are in a better position to plan for the next move of your business—you’ll know how to manage risks, prepare in advance for financial pitfalls and make better use of your resources, creating a much smoother journey to success. Thanks for reading!   Achieve business growth faster with clear cash visibility and accurate projections! Use a fast, intuitive, highly customisable and scalable cash flow tool you can trust—Moolahmore. Request a demo today!