“We never saw it coming…” The Benefits of a Cash Flow Forecast

Benefits of a Cash Flow Forecast

Our brand-new client was still in a state of shock. Just a few months ago, his business situation seemed rosy. The company he had founded was growing nicely. They were profitable, and they had cash in the bank.

But then they lost an important client account. And he discovered that they had corporation tax to pay imminently, as well as other liabilities he had not foreseen. Suddenly, he wasn’t sure he could make payroll that month. He was even considering redundancies. And that’s when he approached us to see whether we could help him turn things round.

It’s actually a story which we hear quite often. Usually from business owners who are depressed and in a panic about their company’s future. But equally often, the business owners we talk to don’t understand the real reason they got into trouble.

And it’s not because they’re suddenly squeezed for cash – although that’s obviously a business-threatening issue! It’s because, exactly as my client put it, they didn’t see it coming.

You see, business owners with good financial management get regular cash flow forecasts. At the most basic level, these reports show how much cash you have in the bank – and how much you should expect to have in the bank next week, next month, and in three months’ time. That’s quite different to profit and loss, because you could be highly profitable on paper, and still have no money in the bank – if, for example, all your clients were late paying you one month.

A good cash flow report tracks what is actually happening to your cash, making it much easier to spot any trouble that might be coming up. For example, my new client would have known several months in advance that his corporation tax was due and that he might have trouble settling the bill. And the moment we suspected he was about to lose that big customer account; we would have adjusted the cash flow forecasts to show the impact on his cash situation. While it wouldn’t have solved his money problems it would have given him the breathing space he needed to find a solution! And that would have been far less stressful.

Working with regular cash flow reports is like driving down a straight, flat motorway, where you can see every bump coming up. It gives you time to swerve. Without one, you’re driving down a windy country road with zero visibility ahead!

That’s why cash flow reports are one of the first things we put in place for the companies we work with. And it’s why you need them too. They’re a basic tool to help you run your business effectively and to take the very best financial decisions for your future, calmly and confidently.

If you’re currently not getting cash flow reports, we can help.

Simply call us today on 01730 719 250, or find out more here. If you would like a cash flow template, please send us a message via our contact form and we will email one over!

We’ll make sure you can see round that financial bend….

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