Cashflow and Forecasting

The benefits of frequent forecasting

We’ve summed up, with a little help from our CEO & Founder Hannah Dawson, why you should be forecasting frequently. It’ll give you real confidence in your predictions, even if you’re still in the concept stages of your business.

Benefit from:

  • Clarity: the more you forecast, the more you can predict
  • Healthier cashflow: identify issues before they crop up
  • Competitive advantage: most other businesses won’t have this level of insight
  • A boost in confidence: make informed decisions about the future

Start off with good habits

Forecasting is, by definition, predicting business activity for a future period of time, working from assumptions. Why go into each week, or month, blindly hoping for the best? By formulating resolving plans for circumstances you can have a degree of calm in business – and it’s a great habit to be in.

Assumptions get easier as you go. Three years of forecasting will give you a great idea of how things tend to pan out and will help you put preventative measures in place.

“All forecasting is hypothetical – but that doesn’t mean it should be a monthly process. Yesterday I adjusted ours, and it makes you ask yourself can we spend more on X? Where did the sales get nailed? Where do we need to focus our attention?

Have we got any accounts payable bills that we need to clear? Futrli is a hugely valuable tool for an entrepreneur to keep on top of the incomings and outgoings, and that’s why we created it.”

– Hannah Dawson, CEO & Founder of Futrli

Regular forecasting and clear communication will give you a better relationship with investors and staff. They’ll be more in the loop and the stress of the unknown is reduced.

Don’t focus too heavily on profit

While profit is important, to keep your business going you need to put a focus on your cashflow. An accurate cashflow forecast will help you identify potential issues that might come up in the year ahead.

Forecasting is a great way to minimise your costs, reduce stock when busy spells fluctuate, agree on a suitable payment plan with suppliers, and keep a handle on whether you need to maximise (or even minimise) your sales volumes and margins.

It’s a competitive advantage

Updating your cash flow forecast on a daily basis gives you an edge over your competitors. Having a good knowledge of your cash position can save your business – extreme outside factors are often waiting around the corner to disrupt the harmony in any business so forecasting will let you know when you’ll need to pull a few more sales in a given time period.

Most importantly, when business is good, you know exactly why so you can pinpoint your reaction. Don’t think of forecasting as just a way to protect yourself from risk. It can also be the shot in the arm your business needs to go from good to great.

Timing is everything

Looking backwards at figures may feel more natural when preparing future figures but it’s not the best way of working. Looking to the future, and using the present to help you do it, is going to give you the best idea of where you’re going. While last year’s actuals will be of some use, it’s best to look where you’re going, not where you’ve been.

Have a look here at what Futrli can do for you. With our management accountants on hand, just on the other end of the phone, you can even have direct assistance with creating your forecasts.