How to create an accurate business cash flow forecast

Woman in white shirt leans hand on open notebook on glass table whilst pointing at tablet/iPad screen that a woman in a blazer and white t-shirt is looking at to show how to create an accurate business financial forecast in Futrli as an accountant and a business owner #forecasting

A lot of things depend on accuracy, and this is particularly important for your financial reports and forecasts. Getting things exactly right will increase your business’ strength and health, so here’s how to ensure your data is spot on.

You need to use as much of your data as you can to set up a reliable and accurate forecast. We believe that a 3-way cash flow forecast is the only way to see the future.

Ask yourself:

  • How are you going to set targets?
  • How are you going to know where to spend your investment?
  • When will you run out of cash?
  • How are investors going to monitor your progress?

Forecasting daily or weekly will help you answer these questions.

Include these key three financial statements

Balance sheet: This summarises your assets, liabilities and shareholders’ equity at a specific point in time. It what the company owns and owes, as well as the amount invested by shareholders.

Profit & loss (P&L): This summarises the revenues, costs and expenses incurred during a specific period of time, usually a fiscal quarter or year. It shows your business’ ability to generate profit by increasing revenue, reducing costs, or both.

Cash flow statement: This records the amount of cash and cash equivalents entering and leaving your business. It allows investors to understand how your operations are running, where money is coming from, and how it’s being spent.

Use all three for an accurate business analysis. They form the basis of your forecast. To take your projection to the next level, include KPIs and non-financial data.

Get a granular view of your business by measuring KPIs

These quantifiable measures determine how well you’re performing against your operational and strategic goals. Breaking down your targets into KPIs makes measuring the success of your business manageable.

Allocate these metrics to each department of your business and have your managers monitor them. By doing this you’ll find your team are working in unity. Managers will have a much deeper understanding of your business, knowing exactly what results you expect and the company needs to move forward. They can be financial or non-financial, so every variable can be looked at.

KPI example

We’re going to look at the metrics you need to measure in a pub or a bar. Here’s an example of some specific metrics:

  • Wet (drinks) sales gross profit
  • Average customer headcount
  • Average customer wait time
  • Waste %
  • Dry (food) sales gross profit

The bar owner measures things that directly impact their revenue. For example, measuring the waste % shows the return you’re getting from your expenditures.

You’ll notice as well that aside from the profit-based KPIs (wet and dry sales), the other three are non-financial. These revenue drivers are crucial, but some business owners overlook them. For an accurate forecast, you need to include these figures. Display these on either a Snapshot card or a Report card in Futrli.

Creating your forecast in Futrli

There are 7 ways to create a new budget, forecast or scenario. They’re all created in the same place to streamline your experience.

You can use your historical data to instantly create a picture of how you expect the business to perform in the future, for example by using the last year’s actuals option. You now have a full forecast built in around 5 seconds, using last year’s operational data as the baseline. Hit ‘New’ on the forecast page next to your organisation and you’ll be presented with the varied options.

On this new scenario page, choose last year’s actuals and ‘Quick create’, then press ‘Build’. This is an accurate projection of where your business is going to be in the coming future. It’s simple and very effective.

To get the most out of your forecast, check it regularly. Monitoring your figures on a regular basis will see your business take an uptick in success.

See more KPIs in our KPI Library.

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