A quick guide to cash flow forecasting

Posted on: 7 Jun 2025 at 12:44 am

At a glance:

Controlling cash flow does not have to be difficult, but it requires more than a glance at your company’s bank account.

Getting a handle on cash flow enables you to profit from opportunities such as buying an asset that is new, hiring additional employees, or making use of discount.

Getting paid on time is essential to maintain cash flow so don’t let your debtors slow you down.

Heads up: looking at your bank account at least once a week isn’t cash flow forecasting.

Small-scale business owners overwhelmed by the thought of preparing the cash flow forecast typically believe that just a glance at their bank account will accomplish the task.

It is crucial for small-scale business owners to know the importance of cash flow forecasting. It’s easy to understand and, instead of complimenting things, can help in making running your business more efficient and your chance at succeeding higher.

We’ve got the best suggestions to forecast cash flow like a pro.

1. Be aware of the cash flow

Put simply, cash flow is calculated by calculating your cash flow based on the amount you pay out and in that you owe and have in cash less what you have to pay.

The cash flow projection can reveal exactly how much you’ve got in the form of liquid funds available.

Your payments in will be mostly made up of sales, whereas your cash outs will also include costs like wages, rent and tax and utilities as well as supplier payments.

2. Learn why it’s important

When you have a handle on your cash flow you are able to run your business more efficiently and successfully.

A lot of small-scale businesses keep inventory and require how much they should have on hand and whether they should buy in bulk, for example.

If you’re not forecasting your cash flow accurately then you’ll be unable to effectively manage your stocks available or make the most of the opportunity that is available - for instance, a price reduction on an order for instance, or being able to purchase a brand new asset.

The cash flow outlook can help you understand the possibility of capital expenditure and warranted at any moment, and help use your money to its fullest potential.

3. Be prepared for the future

When you start out in business and grow, the changes that come with growth can sometimes creep into your life – for example, the shift of being capable of keeping the firm running at a steady pace while keeping an eye on changing cash flow.

It is essential to plan ahead. If, for instance, you’ve not managed your cash flow, you may be running out of stocks and be capable of purchasing. I’ve also seen businesses finance stock purchases on personal credit cards. This can be a costly cycle that’s difficult to come out of.

Pre-planning is also important when it comes to accurate financial forecasting.

Consider things like the potential requirement for additional staff, or the seasonal demand for inventory. Don’t forget about your tax obligations including VAT and PAYE. This is one of the areas where small-sized companies are caught by time and time again.

4. You can use the Chase option to make your payments

It is recommended that small-scale entrepreneurs collect their payments for invoices as soon as they are able to.

It is often difficult to get back a late payment. Chase the invoices that are not paid immediately rather than letting them drag out.

Invoices that are not paid can cause serious problems for your business, and can affect everything from your ability to replenish stocks, or cut back on your advertising or branding budget.

Know what you’re owed by checking in with an annual cash flow plan frequently every week, once a month at minimum. If you’re not sure where things stand, you can’t properly plan for what’s ahead.

5. Are you stuck? Do not be on your own.

Many accounting programs like Xero and MYOB provides the ability to forecast cash flow, which entrepreneurs can make use of. It’s an excellent idea to keep business owners aware of their cash flow There’s nothing wrong with creating a monthly update along with your accountant part of the process.

Small-scale business owners are often working enough and their time should be focused on other aspects of their business. Accounting professionals can help organise their forecasting. Speak to your bank’s accountant or small business loan provider to find solutions to small business growing pains prior to them becoming a problem. It’s better to seek assistance when you realize you may need it rather instead of sticking your head in the sand, hoping your problems will disappear.

There is no need to be an accountant in order to make or manage a budget for your cash flow. However, it is important to ensure it is a regular and consistent part of your business’s plan. In times of uncertainty, such as an outbreak in the world that is now more critical than ever for small business owners to build resilient businesses. And one of the more effective ways to do this is by calculating cash flow forecasts.

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