Cash Flow Forecasting- How Can it Save your Company?

Many small businesses dread cash flow forecasting as it is not the most luxurious task. Though, it is one of the most important tasks to keep track of cash coming and leaving your business. Most times, this only becomes a problem when your business sells goods that allows the customer to pay for them after their goods are delivered. Therefore, with cash flow forecasting you are looking at accounts payable and accrued expenses during a specific period of time.

Cash Flow Forecasting Example

If you make a sale today for $10,000 but the product will not be delivered for 3 weeks to the customer, then you didn’t actually make $10,000 today. You will receive payment in 3 weeks. Therefore, you will not account for that revenue until the payment has been received, not when the sale was made.

The Benefits 

There are several benefits to keeping track of your cash flows. It is essential to help keep your business running smoothly. So, here are some key benefits to keeping your cash flows in order:

Identify Future Problems

By using cash flow forecasting, you are setting your business up for success. This method can help you predict your future month’s cash. Therefore, you will know which months you have a cash surplus or when you have a cash shortage. Giving you the ability to properly adjust expenses as needed. 

Minimizing your Cash Shortage 

Cash flow forecasting gives you insight into what to expect as far as cash inflow and outflow. After you have predicted when you may have a cash shortage, you can take proper steps to avoid that shortage. 

Stress Less and Be Happy

Finally, forecasting is an effective way to keep the peace with your employees and suppliers. Late payments to suppliers and missing employee paychecks can really hinder relationships and reputability. So, stay on track and make cash flow forecasting a top priority. At the end of the day, it’s a win, win situation! 

We highly recommend you equip yourself with the knowledge and tools to keep track of your cash flow. Make it your priority. If you are unsure of how you should be doing this, do research, or take a course! TGG-U has several classes and courses designed for you to be able to run your businesses accounting without a hitch. Reach out to us with any questions you may have!