Forecast Your Cashflow In 5 Steps (for CEOs, MDs and investors)
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The document outlines five essential steps for forecasting cash flow, crucial for SMEs and startups to maintain business viability. These steps include assessing bank balances, understanding customer payment timelines, scheduling supplier payments, accounting for other necessary expenditures, and reviewing overall cash flow to take corrective actions as needed. Proper cash flow forecasting helps reduce stress, save money, and ensure smoother business operations.
Forecast Your Cashflow In 5 Steps (for CEOs, MDs and investors)
- 1. 5 steps to forecasting your Cashflow. Essential for all SMEs and startups
- 2. Cash is the life and blood of your business. So you should ensure you have visibility of it for (at least) the next 30 days . The alternative is to fly by the seat of your pants. Which is not recommended. © Virtual FD 2010 | [email protected]
- 3. A clear picture of your cashflow can save you stress and money and most importantly your business . It can also do the same for your investors. A forecasting tool can also save you time , and let you get back to running your business! © Virtual FD 2010 | [email protected]
- 4. Step 01 What is your bank balance, and what overdraft have you got? Two numbers which should be clear in your head before you forecast. © Virtual FD 2010 | [email protected]
- 5. Step 02 When are your customers going to pay you? This is not just about when payments are due but on what date will that money hit your bank account? Direct debits and merchant payments provide some certainty, otherwise ask your customers to confirm when the payment will be made. You may need to get used to calling them twice. © Virtual FD 2010 | [email protected]
- 6. Step 03 When do you need to pay your suppliers? Who do owe? How much? When? Do you have pay suppliers on fixed (bi)monthly payment runs? Do you negotiate credit and payment terms? Do your suppliers call you to confirm payment dates? © Virtual FD 2010 | [email protected]
- 7. Step 04 What other payments do you need to make? The weekly or monthly payroll, the monthly PAYE / NI return, the quarterly VAT return, etc. These don’t come with credit terms and are payments which should not be missed. © Virtual FD 2010 | [email protected]
- 8. Step 05 Review your cashflow profile (and take required action) If you have a hole in your cashflow, expected or not, you now have time to (a) chase another customer, (b) delay a supplier payment, (c) ask your bank for a temporary facility, (d) request funding, or (e) have the money ready yourself! © Virtual FD 2010 | [email protected]
- 9. Case Study £75k in the bank ; £25k overdraft facility £250k owed by customers £150k owed to suppliers £57k payroll at end of month £75k owed to tax man £2.5k bank charges / interest So that looks like £40k in the bank? © Virtual FD 2010 | [email protected]
- 10. However, from this profile there isn’t cash in the bank to pay your staff in 28 days time © Virtual FD 2010 | [email protected]
- 11. With a high-level view of this one-page cashflow tool, let’s walk through the 5 steps. © Virtual FD 2010 | [email protected]
- 12. Step 01 What is your bank balance, and what overdraft have you got? Bank : £75k Overdraft : £25k © Virtual FD 2010 | [email protected]
- 13. Step 02 When are your customers going to pay you? © Virtual FD 2010 | [email protected]
- 14. Step 03 When do you need to pay your suppliers? © Virtual FD 2010 | [email protected]
- 15. Step 04 What other payments do you need to make? © Virtual FD 2010 | [email protected]
- 16. Step 05 Review your cashflow profile? © Virtual FD 2010 | [email protected]
- 17. Step 05 Take required action © Virtual FD 2010 | [email protected] Shareholder advances of £40k lined up.
- 18. Step 05 Track payments & receipts weekly! © Virtual FD 2010 | [email protected]
- 19. More about me ...
- 20. © Virtual FD 2010 | [email protected]
- 21. © Virtual FD 2010 | [email protected]