Cash is king! We all understand that if a business runs out of cash-on-hand, it cannot operate: it won't be able pay its workers, purchase stock, or cover building lease and electricity charges. However with cashflow forecasting, you can pro-actively keep your business viable.

Cashflow forecasting is exactly what it sounds like - taking an educated guess at your up-coming sales and expenses, to ensure the former can cover the latter.

How often you forecast cashflow depends on the soundness of your business - if your business is struggling, you should ideally be forecasting and revising your cashflow every single day.


Benefits of forecasting your cashflow include:

  • Identifying potential shortfalls in cash balances in advance - effectively your "early warning system"

  • Ensuring your business can afford to pay suppliers and employees

  • Spotting problems with customer payments early, reducing the risk of bad debt write-off's

  • Keeping current information on hand for stakeholders such as banks and lending institutions


The following will help you to maintain and improve a healthy cashflow position:

  1. Protect your cash position against revenue surprises by maintaining a cash buffer. A balance equivalent to at least two months of operating expenses acts as an insurance policy against the unexpected.
  2. Be frugal with your revenue expectations and take action immediately if it looks like sales figures are not going to make you break even.
  3. Credit checking up front will reduce the risk of customer non-payment. Stipulate clear payment terms on your invoices, and communicate regularly with your customers.
  4. Every dollar you spend reduces cash reserves. The best way to protect your cash is to create a budget for the spending you know you need, and more importantly, sticking to it.

If you would like to have a chat about your business's cashflow position, please drop us a line - we'll be happy to help.