Handy tips for doing a cash flow forecast

Anyone who has tried their hand at a cash flow forecast for the first time, knows the hair pulling frustrations that it can sometimes entail—if you don't know what you're doing. However, with a few handy tips, and a little patience, a cash flow forecast is as easy as pie. For small to medium organisations, “cash is king” and knowing how cash flow works is the key to running a successful business.Good cash flow management will allow your business to run easily, and provide you with a keen awareness into your affairs, so you can predict the peaks and furrows in your cash balance, and know if your business is meeting expectations. It can also help you to plan borrowing ventures and tell you how much extra cash you're likely to have at any given time. To create a cash flow forecast you can use the inbuilt template in your copy of Microsoft Excel. If you don't have Excel you can download the open source version of excel called 'Calc' at www.openoffice.org/product/calc.html—it's free.Another option is to use one of two free online templates at www.firstfactoruk.com or www.startups.co.uk. Once you have downloaded your template there are four easy steps to preparing the perfect cash flow forecast.1. Evaluate how much you’re likely to make every month using your business’s past records or by using information from customer surveys, your suppliers, and trade professionals.2. Evaluate expected payment transactions on incomings. If you have a cash business this is simple, however, if you sell products or services on credit you will have to consider the consequences of possible payment delays and add those into your cash flow forecasts.3. Ask yourself, 'what are my likely costs?' These will probably be made up of fixed and variable expenses. Once you recognise the outgoings you need to make, and when you need to make them, insert them into your cash flow forecast.4. Lastly add your monthly incomings and the related outgoings into your cash flow forecast. Once you've done that just type in your initial account balance, and then your income minus outgoings for each month. This will show you what your cash position is. Then you're good to go.However, if it all seems a little too tedious and complicated for you, you can always give your accountant a call and ask him/her to help you set up an professional cash flow forecast—or for a few pounds he/she can do it for you.Oh, and lastly to help you on your cash flow forecast adventure, visit your banks website for tips and tricks. Keep on top of your business's financial well-being —it will serve you more than just financially.

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