5 Benefits of Having a Good Cash Flow Forecast

Still don’t have a cash flow forecast? Read about how a meticulously planned cash flow forecast can help you highlight impending problems, follow cash flow trends, operate in a weak economy, impress investors and plan for future business growth.

Are you using your bank balance to manage your company’s cash flow? If yes, please don’t, as your bank balance may not be the best tool when it comes to managing your cash flow. A bank balance only tells you how much you have in the bank. It will not tell you how much your business owns to creditors and vendors. Why not do your enterprise a favor and manage your cash flow with a forward thinking cash flow forecast.

  1. Learn about cash flow trends and patterns

    With a cash flow forecast that is reviewed and reconciled on a regular basis, you can learn about the trends and patterns impacting your cash flow cycle. These trends and patterns will reflect the ebbs and flows of your business’s cash flow cycle. You can also comprehend why some months the cash flow is negative, while others are cash flow positive. By taking the time to understand these trends, you can manage your cash flow in a better manner and plan in advance for tight months.

  2. Highlight impending problems

    A 90 day cash flow forecast is beneficial, but a six month forecast is ideal. By looking ahead 90 or 180 days, you can provide your management with a good view of your cash flow. Mapping out cash flow needs will inform you of impending cash flow troubles in the future, thereby giving you the time to plan ahead and put an end to a cash flow crisis. Remember that actual financial and cash flow results will differ from your forecast, so it is critical to review and reconcile the forecasted vs actual results on a regular basis.

  3. Operate a robust business even in a weak economy

    Have you always wondered how your competition stays strong during tough times? A good cash flow forecast is the key to this secret. A well thought-out cash flow forecast will enable your management team to know exactly when and where your cash inflows are coming from. It will also give you the answers to understand when and where your cash outflows are going out. This will help you management to manage labor costs, cut down on frivolous costs and price products/services approximately. With a cash flow forecast, you enterprise has a better chance at surviving during a storm.

  4. Growth planning

    Do you have plans for the future growth of your business? With a cash flow forecast, you can plan accordingly for your growth plans. A cash flow forecast will show you if your business has sufficient internal cash to fund your growth plans or if you need to look for outside funding.

  5. Astound investors

    As you would already be knowing, outside investors and banks want to see what you plan to do with your cash investment, how and where you want to spend it and how soon they can expect to be paid back. With a clear cash flow plan, you can get access to the required outside funding to help your business achieve its growth plans.

With a good understanding, better management and careful planning with your company’s cash flow, you can give your business a head start. Why not get a professional company to help you with a meticulous cash flow forecast? Read more about cash flow forecast services.

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