Managing a business during the global pandemic without an effective cash flow forecast is very much like driving at night blindfolded. Likely, you’ll generally be moving in the right direction, but perhaps not for much longer on the road. Your business could be at risk from an oblivious critical danger if not properly prepared and forecasted.
The impact of COVID-19 on businesses has been considerable across industries and it has turned the notion of “business as usual” on its head. Many business owners have found that forecasting cash flow has helped them anticipate potential shortfalls and plan accordingly to cover difficult periods. Generally, when it comes to future expectations of their profit and loss, business owners tend to know their business like the back of their hands. They know what margin to expect from every product or service that the business offers and also have a clear understanding of operating expenses.
However, what business owners do not particularly know or anticipate is the “how” and “when” changes to revenue, cost of goods, and other general operational costs will affect their cash balance in the bank. Regardless of the impact of normal course of business…positive cash flow or negative cash flow… the phrase “Revenue is vanity, profit is sanity, and cash is king” indicates the importance and the value of cash flow forecasting. Cash flow is everything!
Cash flow forecasting, even during the pandemic, offers your business several advantages.
Some of the banking and financing benefits of cash flow forecasting include:
There are many other benefits associated with cash flow forecast such as:
Performing cash flow forecasting is easier than you might expect. There are many software programs and tools available such as QuickBooks, Pulse, Dryrun, and Float, or you can even use a simple spreadsheet to track and plan cash flow. Cash flow tools can be linked to other business software such as the Hubdoc document storage program and apps such as Expensify and Bill.com.
Steps to follow to perform cash flow forecasting are straightforward:
Businesses need to access all the planning tools in their arsenal during the pandemic. Cash flow forecasting enables you take a proactive stance and to better understand your future cash needs and potential spending gaps. Using cash flow forecasting will allow you to avoid surprises and make better business decisions.
Do you have questions on how your business can use cash flow forecasting?
We can help.
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