Cash Flow Forecasting

We often hear the question “How can I predict when I will receive cash from customers?” 

This is a common issue in small business, however you can start by plotting your costs and overheads in a spreadsheet and using that knowledge to calculate what cash you need to cover them.  You can use prior knowledge of customer payment habits as well as making follow ups to get the money in quicker.

It can be very tempting if a lump of money comes in to spend it on items that you feel are needed, but a forecast can often demonstrate a need down the track for those funds.

If you forecast a shortfall in your cash position i.e. an overdraft or exceeding an overdraft, at least you are forwarned and can take action to avoid it.  You can focus on selling more or collecting more quickly from customers.  You can look at your purchasing of goods and services and time them to fit in better with your future cash position. 

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