Just hearing the word ‘cashflow’ can be enough to give even the most steadfast entrepreneur cold sweats and sleepless nights. Usually because a call for discussions about cashflow often spells trouble ahead, but this isn’t necessarily always the case.
Cashflow status is an extremely handy tool which businesses can use to their advantage when documented correctly via forecasting. For this reason, we champion the idea of using cashflow year-round to inform spending and key decisions, rather than just neglecting it until crisis point.
Here’s how cashflow forecasts can dramatically impact the success of businesses whether they’ve got pots and pots of money in the bank or barely breaking even each month.
Damage control in case of shortfall
Unless you go by the name of Mystic Meg, the future will forever remain a mystery. That means you really can’t predict what is going to happen within your industry or the economic landscape, no matter how much you might like to.
What you can do, however, is prepare for any likely or possible eventualities to ensure that your back is covered. You can use cashflow forecasting to distribute money more efficiently and ensure that you aren’t left short if financial crisis or unforeseen expenditure should occur.
Improved chance of securing loans
Cashflow forecasting enables you to gain a much wider insight into the numbers going in and out of your business bank account.
Attaining this knowledge will enable you to ensure your accounts are in a much healthier position, which will then boost your chances when appealing to lenders and potential investors.
To spend or not to spend – it answers the question
Having this kind of tight grip on what’s coming in versus what’s going out will stand you in a much better position when it comes to decisions around spending.
When you’ve got a cashflow forecast in place, you can use this to plan when might be the best (most affluent) time to invest in things like new equipment, recruitment, stock or technology.
Once you have a number of forecasts to refer back to, you can compare them against each other to spot any potential trends around when might be the best time of year for your business to spend.
Similarly, comparison of cashflow forecasts will enable you to spot any opportunities for cost-cutting or redistribution of spending.
Avoid dreaded debt and late payments
As well as making sure you’re prepared for any shortfall and are well informed when it comes to investing money into various parts of your business, cashflow forecasts will help you stay on top of payments and dodge debt.
When you’re well-versed with how your cash is flowing through the business, you will naturally be more aware of due payments, deadline dates and any outstanding invoices. Not only is this great practice, it will also keep you on the right side of HMRC and the partners you choose to do business with.
If cashflow forecasts are something you’d like to start implementing into your financial processes – and we certainly recommend doing so – you’ll need to ensure all your bookkeeping is accurate and up to date. And with Pandle’s software this is easier than ever!