![]() When a business is struggling with its finances, it’s very easy to feel overwhelmed and then it gets difficult to find a way out. These will also depend on the type of business but might include:Īccountants will offer a second pair of eyes to help identify where cash is being wasted and to identify what positive changes you could make to release some cash flow and make the business more cash positive. Tax-deductible expenses for companies or sole traders can be money spent on administration or operation. ![]() This way, if you need to adjust your sales numbers later (for example, if you actually sold 10 units in March when you thought you would sell 5), it will be easier to adjust the actual cost of goods sold. When you calculate your cash outflows, work out what it costs to make goods available. Look through your historical data carefully for items that you only have to pay once or twice a year, such as corporation tax payments or lump insurance payments. For instance, you’ll have more shipping costs in months when you have more sales. Variable costs change according to your sales. Fixed costs are the costs you have to pay regardless of how much you sell in a given period. These include both fixed and variable costs. If you want to acquire a loan for company expansion or the purchase of property or equipment, you’re going to need accurate financial reports such as cash flow forecasts that show you can service the debt and provide piece of mind for your financiers. To gauge whether or not this is a wise financial decision, you can input the proposed employee’s salary and other related costs into your cash flow forecast. For example, you may feel that you need another employee to help you keep up with the workload. Without a reliable cash flow forecast, it can be difficult to make good hiring decisions. For instance, investing in new production equipment, offering next day delivery offers, or understanding the cash flow implications of launching a seasonal product range. Using cash flow forecasts, you can play out the financial implications of hypothetical business scenarios. Scaling and growing your business always comes with a degree of risk. ![]() By identifying these clients, you could create more strict credit periods to improve your cash flow and avoid periods of negative cash flow due to these late payments. ![]() A prolonged period of positive cash flow could mean that you have enough surplus cash to invest in new equipment or processes that could benefit your business in the long run.Ĭash flow forecasting can also give you insight into clients who regularly pay late and impact your cash flow. ![]() Being aware of when you will have surplus cash available - you can use this positive cash flow balance to your advantage. Just as cash flow projections can be used to identify periods of negative cash flow, it can also be used to predict periods of positive cash flow. This is a particularly important benefit of cash flow forecasts for businesses who experience significant seasonal sales fluctuations. For example reducing cash outflows for that month, using credit to pay suppliers, or saving surplus cash for these periods. To predict cash surpluses and cash shortagesīy identifying potential future cash flow gaps, businesses can take measures to prepare for these. ![]()
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