Cash Flow Forecast

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HEAD: Cash Flow Management for Business Owners

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What Is Cash Flow?

It’s the money that flows into and out of your business. And it’s the key to business health.

Money flowing in:

·         Investors

·         Financing

·         Collections

·         Accounts receivable

·         Sales

·         Internet Sales

·         Assets sold

·         Cash received

Money flowing out:

·         Advertising

·         Loan payments

·         Insurance

·         Depreciation

·         Taxes

·         Accounts payable

·         Employees

·         Vendors

·         Equipment

·         Rent

·         Supplies

·         Utilities

Why Is Positive Cash Flow Important?

·         Pay invoices

·         Pay people

·         Pay of debt

·         Pay dividends

·         Survive downturns

·         Avoid business interruptions

·         Buy back shares of stock

·         Earn a better negotiating position with suppliers

·         Get a better rate from lenders

Why Is Negative Cash Flow Important?

Can be a sign of growth. It takes money to:

·         Purchase more inventory

·         Open a new office/restaurant/store

·         Hire and train employees

But it can also be a small business killer.

45% of business around the world close due to lack of capital.¹

This is also known as running out of money.

And it can happen to the best of us:

37% of experienced business owners fall short of cash sometimes.²

Smart Ways to Avoid Common Cash Flow Problems

Get paid.
Don’t be too busy or too shy to bill clients. Create standard emails that are professional, not apologetic, to send when an invoice is due and past due.

Dream big, but use a spreadsheet.
Apply quantitative forecasting methods to historical data to keep future sales projections grounded in reality.

Stick to your budget.
Don’t be tempted by ads promising better, faster, easier ways to work. Stay strong to avoid impulse purchases, especially during the startup phase.

Follow the money.
Look for cash flow patterns, especially if your business has peak seasons, so you can allocate your inventory and your time accordingly.

Give yourself breathing room.
Operating your business too close to the edge every month is asking for trouble. Keep a safety net that covers two months of expenses.

1.    www.gemconsortium.org/file/open?fileId=50213

2.    www.cnbc.com/2014/07/30/11-all-too-common-reasons-small-businessesfail.

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