An accurate cash flow forecast can help protect and grow your business

Being able to determine the future cash flow of your business is imperative to its ongoing success and survival. Fortunately, to this end there exists the cash flow forecast. A cash flow forecast is essentially a prediction of the amount of money that will move through a business during a particular future time period.

Cash flow forecast

Obviously, an accurate forecast cannot be made without first analysing the current and past cash flow of a business.

Cash flow analysis is essentially the study of the cycle of a business's cash inflows and outflows. The purpose of a cash flow analysis is to maintain an adequate cash flow for a business, and to provide a sound basis for cash flow management and forecast.

How an accountant can help with your cash flow forecast

An accountant can help your business create a cash flow template - a document for tracking the cash inflows and outflows at the present time. These templates can also include a column for forecasts.

While it is easy enough to add a forecast column to one of these templates, the ability to determine and analyse future cash flow is another matter. This is where an accountant can be of even greater help.

"We look at a combination of what's happened in the past - that's a pretty good indication of when payments are going to come up - and then we go through what the business knows is going to have to be paid and when it's going to have to be paid," explains Robert Warren from accountants Edwards & Partners.

"For example, if you want to buy a new car you'll have a fair idea of when you're going to do it and how much it's going to cost."

Benefits of a cash flow forecast and cash flow analysis

• A careful forecast can help stabilise the cash flow patterns in your business.
• A forecast can enable you to meet seasonal commitments and plan for future expenditure, e.g. on equipment.
• A cash flow forecast can show when additional funds might be required in both the short and long term.
• Cash flow problems often catch small business owners unawares - an accurate cash flow analysis can protect businesses from this situation.

• The long-term survival of a business depends on its ability to successfully manage cash, and cash flow forecasting and analysis can help with this.

Get forecasting!

Cash flow forecasts and analysis are the building blocks of a strong, viable business. Accountants have the expertise to properly analyse your business data to work out your future cash flow, so to get a professional cash flow forecast, call an accountant today.