Business don’t fail because the make a loss. They fail because they run out of money.
The purpose of cash flow forecasts and financial projections is to see what’s coming and make sure you don’t run out of cash!
Many people try and do forecasts as accurately as they do their monthly and annual accounts, but they are by their nature a ‘best guess’. The important thing is to have enough detail to see when there might be a cash flow glitch that will cause a problem. This is often when an annual tax bill falls due, or VAT and PAYE payments coincide, or just understanding the problems that will arise if a major customer takes an extra month to pay.
We can assist you with the creation of budgets and cash flow forecasts, to help you to review and manage ongoing business performance, and spot these potential crisis points in time to do something about it. Once the model is created you can sensitise it up or down and see the impact it makes. Sometimes increasing turnover can improve profit, but worsen cash flow dips!
If we do spot a problem, we can then help you to consider the options with the least risk. Is it better to stall suppliers or speak to your bank? Pay the tax late or miss a loan instalment? Critical issues that need to be spotted early, so they can be managed.
This includes setting key financial targets specifically tailored for you, whilst understanding the cash flow implications and providing a benchmark of the results for the year ahead.