We've Got Your 2019 Cash Flow Forecast Sorted

Happy New Year!! I hope you all took the time to celebrate your wins in 2018, enjoyed some well-deserved downtime, are feeling refreshed and ready to take on 2019.

So have you checked your business bank accounts? Are they looking healthy? If so, hats off to you and keep up the great work. If not, it sucks, but you’re not alone. The Christmas/holiday period through to mid-January is often the most difficult time to manage cash flow.

Let me set the scene, your B2B customers have all been on holidays, many haven’t settled their December accounts and may not do so until their finance teams are back from holidays. Everyone being on holidays also means that end user sales are slow into January, which is made worse by the fact that most people are about to receive their post-Christmas credit card statements. Once they get over the bill shock, chances are they’ll cut down of general spending to pay off the damage done in December and again sales will take a hit. All the while, you’ve had to pay leave entitlements to employees during the holidays while little, to no cash was coming in.  All of these factors aren’t good for business right now, or your cash flow over the coming months.

Good cash flow planning has never been more important than right now. Taking action, means you could avoid cash issues snowballing into February (conveniently when your December BAS is due for payment) and set solid foundations heading into the Easter break.

I know it seems like I’m always banging on about cash flow (that would be because I always am!), but it’s the most critical part of running a successful business. We see far too many businesses encounter cash flow issues and find themselves with uncontrollable levels of debt, much of which could have been avoided if they’d had some early intervention.

It’s really important that you have complete visibility around your cash inflows and outflows over the coming week, month, quarter and even year, so that you can plan for slow sales periods and holidays, as well as further growth and investment in your business. How do you know if you can afford to take on a new equipment lease or a new employee if you don’t know what your future cash flow looks like? A cash flow forecast will give you this visibility and the information to make informed decisions in your business, as well as supporting you through the difficult holiday periods.

The idea of a cash flow forecast has often fallen into the realm of ‘things accountants do’ and put into the too hard basket for business owners that aren’t comfortable with numbers or don’t have an in house accountant/CFO. Well I’m here to tell you that anyone who knows how to receive or spend cash can manage a cash flow forecast. The underlying principal of a cash flow forecast is as follows:

Opening cash + Cash receipts (eg sales) – Cash disbursements (eg expenses) = Closing cash (ie What’s left in the bank)

We tend to prepare forecasts on a weekly basis, tracking actual receipts and disbursements week by week, then planning cash movements for a rolling 12 month period. Most of our planning is built around historical trends, some assumptions around growth and known commitments (eg weekly payroll or quarterly BASs).

To assist with your cash flow planning, we’re going to share our basic cash flow forecast template for you to download and populate with your own data (download Cash Flow Forecast Template here). It’s an editable file, so feel free to change the layout to best suit your needs. If you have any queries or hit any snags with the template, feel free to send us as email at info@brambleandbriar.com.au.

As always, if you have any queries or require support with cash flow planning you can contact us on the email above or send us a query via the contact us page here.

PS - A good cash flow forecast is one part of overall cash management. Read our tips on good debtor controls here, tips on how to get paid faster here and the importance of stock control here.