KEEP IT SIMPLE

A spreadsheet is an ideal tool for cashflow forecasting because it can easily be customised to suit your requirements. It provides visibility as each week progresses. It can be as simple or as sophisticated as your business requires. You need a section for receipts, one for payments and a balance showing available cash each week. It is helpful to have a summary supported by separate sheets containing the details for each part of the business. Weekly forecasting is suitable for most situations although monitoring cash on a daily basis may be more appropriate if cash is very tight. You should forecast at least 3 months into the future so that you always have your next VAT payment in view.

MANAGING YOUR CASHFLOW

Having built your cashflow forecast you’ll need to allocate time to keeping it up to date and regularly reviewing it. If you identify cash shortages in the future you should use the forecast to assess what action to take. Firstly, do everything you can to secure your cash collections on time. Secondly you can move payments dates in the forecast to model different options to improve the cash balance but you must ensure you have agreed this with your suppliers. You might choose to delegate the updating of the cashflow forecast to another member of your team but it is vital that you keep a close eye on it.

TAKE ACTION

If your business already has a cashflow forecast in place then it’s important it is up to date and used to plan ahead. If you don’t use a cashflow forecast then there has never been a better time to start. Create one for your business today.

QUESTIONS TO CONSIDER

- Is my cashflow forecast accurate and up-to-date?

- How often do I review my cashflow forecast?

- What options do I have if cash gets tight?

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