Projecting your cash flow and planning ahead for business success

March 6th, 2017

 

One of the clearest indicators of the success or failure of any business is its cash flow. If you're not only making sales, but also collecting debts in a timely fashion and using that capital to actively improve your business, you should be in good shape moving forward.

The more you know about your ledger, the better you can plan ahead for future developments.

Awareness of your cash flow situation is key. The more you know about your ledger, the better you can plan ahead for future developments. This is why many executives have begun embracing the process of cash flow projection, which helps them anticipate changes in their businesses' solvency long before they happen.

If you can plan ahead where cash flow is concerned, you can position your business to do great things.

How a cash flow projection helps

If your company is dealing with a pile of unpaid invoices and you're unsure how the future might look with respect to cash flow, it makes sense to prepare a budget that projects when money will be moving in and out. According to the Australian Taxation Office, this can benefit your business in a wide variety of ways.

For example, this can give you a snapshot of your company's cash position at any point in time you desire. If you're planning to hire an employee but can't decide whether to do it in two months or in four, a cash flow projection can help you see when you'll have the most capital available to do it. Whatever expenses you have in your company's future, they'll be easier to plan for.

What if solvency trouble lies ahead?

If you go through your forecast sheet and discover that issues with solvency lie ahead, it's time to be proactive and take immediate steps to improve cash flow, according to Inc. Magazine. One way to do this is to tighten up your credit requirements with debtors. If you've been giving people 60 days to pay what they owe, it might be time to slash that window dramatically.

If you don't have enough money on hand, do something about it.
If you don't have enough money on hand, do something about it.

The other option for improving solvency is to reach out for external financial help. This may come in the form of invoice finance.

How invoice finance might help

If you need to get your hands on working capital quickly and bring your business up to speed, the most reliable way to do it is to acquire cash through invoice finance. Why rely on your customers to pay you when you can get money more quickly and easily this way?

With the money you get through invoice finance, you'll be able to turn around and pay suppliers faster, thus fuelling the growth of your business. The better your cash flows, the more success your company will ultimately have.