At this challenging time, cash flow is an essential element of business survival. Not having sufficient money coming in and having too much money going out of a company is one of the most common causes of business failure.
New businesses often struggle with cash flow, but many established businesses have seen their cash position weakened by recent events as well.
With this being the case, it is important that businesses carefully monitor and manage their cash flow throughout the life of their business.
To manage cash flow effectively, owners need to be able to forecast how their business will perform in future.
A well-prepared forecast can help to predict sales performance, estimate costs and spend expectations and indicate when cash will come into and leave a business so that owners can better plan investment.
Using this information, a business can be empowered to make decisions and investments safe in the knowledge that it has the cash to meet its objectives.
Businesses should compile a 30, 60 and 90-day cash flow forecast, as a minimum, but longer forecasts can also be useful up to a point, although they tend to be less accurate.
Drawing up these forecasts for your business needn’t take long, but it doesn’t hurt to seek professional assistance to ensure that your forecasts are accurate and you have advice on hand to act quickly on any issues or trends that emerge.
With the advent of the latest cloud accounting technology, it has never been easier to effectively and accurately forecast cash flow. Many solutions are now able to collate financial information from various sources to provide you with the business intelligence you need.
Outsourcing the monitoring and management of your cashflow to an accountant could drastically improve your chances of keeping cash in the positive, allowing you to build surpluses so that you can reinvest in your business,
Employing the services of an accountant could also help to improve issues related to poor cash flow such as late payments, credit control and finance.
If you have queries about cash flow forecasting or management, please contact our specialist accounting team at enquiries@stca.co.uk or 01494552100 or your usual Seymour Taylor representative today.
This blog is for guidance only, professional advice should be obtained before acting on any information contained herein. The information was correct at the time of publishing 21 March 2021.