It is tempting as a small business owner not to bother trying to forecast either cash or income; after all, to a great extent the timing of these events is out of your control – isn’t it? But once you see your projected income and costs in a spreadsheet, you'll know exactly how much you need to make every month to keep going, and how much you'll have left over for other things, like your salary! It will then be far less tempting to spend money on things that are not part of your business plan. That's what a budget is really for - to make sure that your costs are not higher than your income, so you can keep your company afloat.
Cashflow management is one of the most important tasks every business owner must understand. Many businesses have had to close because they were not managing and controlling their cash. A cash forecast is simply a tool that businesses use to work out how much and when is money expected to come in, and how much and when is it expected to go out?
This way, you will be able to see if and where you are likely to run short of cash, or if you will have a surplus of cash, you can plan what to do with it, i.e. to temporarily reduce a interest-bearing loan.
Income forecasting and control is about income (= revenues less costs = profit). Many profitable companies go bust if the cash runs out but equally many businesses (especially big ones) can continue to trade inefficiently, without significant income & profit, because they have sufficient cash to trade through their problems.
Many businesses collapse due to a lack of cashflow. At Lawrence Young, we have many solutions to keeping your cashflow as tight as possible. Book your call today to find out more!