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Cash Flow Forecasting

As a business ourselves, we know the importance of cash flow forecasting and having your finances in order. That is why Roger Hatherall and Co provide small businesses with effective cash flow forecasting so that you are in line to be a profitable business rather than disorder.
Below are 5 of our golden rules when it comes to cash flow forecasting and its importance.

1. Staying Level-headed with Your Finances

In most cases, it is important to be pessimistic about your finances rather than over optimistic. If you are too over assumptive you can often be let down even more and miss vital data when accounting for your income and expenses.

A cash flow forecast is not worth the paper it is printed on if the information in it is faulty. There is also no use in having your head in the clouds, wondering what could be rather than focusing on what is happening right now. At the same time as being focused, you can never cut corners to make it easier for yourselves.

Here at Roger Hatherall and Co, we take great care of all of our clients and understand that every single piece of information is vital to forecasting your cash flow. Missed receipts, avoided expenses and dodged invoices are a serious hindrance to your accounts, so pay attention to every single detail to move forward financially.

2. Income and Costs Are Different

All business owners need to know the difference between an income and a cost. Although you may think that an invoice is an income and an expense is a cost, this is not the case.

The main purpose of cash flow forecasting is to analyse the potential future of your account by looking at the money entering and leaving your account right now, not in a few days. Some cases where this can be mistaken is when you are issued an invoice but the actual collection date for the money is in 90 days, meaning you have 3 months to wait until you actually see the money not ideal for forecasting your cash flow.

The same goes for expenses that are paid for using credit cards or a financial credit package. Although you may be gaining the product or service now, it is not effecting you financially right away which needs to be noted when cash flow forecasting. Knowing the difference between the two is vital for successful cash flow forecasting and accounts.

3. Preparing for Everything

Although cash flow forecasting is one way of predicting the future it can never predict the worst and unexpected halts in your business progression. Within sales, income, expenditure and bills you have to be able to plan for everything to ensure that you are never left out of pocket further down the line. Just like we can t predict mother nature, you cannot 100% predict your business finances – so don t try to! Simply make sure you are always prepared.

4. Seasons Change and So Do Your Accounts

If your business is primarily season related, for example selling Christmas trees, you will be more than aware of the changing seasons effecting your accounts. If you are not aware of this, either because you are a start-up business or are trying to work at full speed all year round, you will soon learn that some businesses are not as successful every month of the year as they would be in their seasonal period.

Take care of this with efficient cash flow forecasting and take note that you may take a hit some months, whereas others can be the best you ve ever had. Make contingency plans, plan your finances and safely manage your accounts with Roger Hatherall and Co.

5. Dont Forget Variable and Fixed Rates

It really does pay to remember that your business will have variable and fixed rates. The standard fixed rates include utility bills, broadband, rent and other outgoings that are the same every month. Whereas variable rates can include stock control, electricity, business mileage and heating because who needs heating in the summer months?

Make sure you are aware of all of your outgoings and how these can differ throughout the year and you are set to be making the most out of your business in no time at all.