As an aspiring entrepreneur, or someone who already owns a business, at some point in time you would have created a business and financial plan. When you created these plans, you had visions of how the business would work. Because we get so caught up working IN the business, we forget to make time to work ON certain parts of the business; and that includes your financial plan. It needs to be treated as a live document, not something you create and put aside never to be read again.
Why create or refresh your financial plan?
The answer is quite simple: cash flow forecasting and management makes or breaks a business. Statistics show that 8 out of 10 new business ventures fail within the first three years. This is largely due to poor business and financial planning. You can increase your chances of success through thorough, thought out planning. The better you plan, the better your chances are for success. Not only that, but most financing sources (should you require them) require a business and financial plan as part of the loan application process.
What does cash flow forecasting and management really mean?
Cash flow is the primary indicator of a business’s financial health. It helps measure your ability to pay your overheads this includes: rent, insurance, wages, and supplier invoices. Successful cash flow management really comes down to the management of the money coming in vs going out. If you never have money in the bank to pay bills and expenses, then you may want to modify your financial plan ASAP.
What can you do to help get your cash flow forecast and plan working for you?
- Compare your original plan to the current expenses you have now. Was your original forecast correct? Are you meeting your targets? If not, you need to modify your plan for it to match your current situation and desired outcome.
- Look at your current accounting software to see if it can help you. Some systems have budget sections in place to help you forecast over the next year.
- Seek advice from someone who does this as a job! An expert Accountant or Bookkeeper can sit down and work out a budget with you. Alternatively, if numbers just aren’t your thing you can always ask them to help prepare the budget on your behalf.
- Look at areas of your business where you can cut down on spending. If you can cut down on costs, then you should. For example, are you posting invoices and/or correspondence? Postage is now up to $1 for a normal letter. Email is widely used these days, so take advantage of this free service.
Now is the perfect time to re-visit your financial goals and plans, as we are at the beginning of the new Financial Year. Make the time to figure out where you want your business to be this time next year. Your business will thank you for it.
Want to get a clearer picture of your next financial year but time poor or not sure where to start? Then get in touch with the team at GoFi8ure. We are experts in assisting businesses with cash flow forecasting and management – – get in touch to discuss your needs further.