What is Cash Flow Forecasting?

Cash flow forecasting is a method of estimating the flow of cash in and out of a business over a specific period of time. A cash flow forecast is crucial for small business owners as it allows them to plan ahead effectively and have an amount of contingency money in place in case of an emergency. It is a way of estimating how much cash is coming in and out of a business over a given period of time and will be a big help when making important decisions about funding, investments, capital expenditure and other commitments.

Cash flow forecasting should be carried out over a range of time periods, so that a business can plan for both the next few weeks and the next ten years. For example, a short-term cash flow forecast could cover the next 30 days and be used to manage the amount of cash available on a day-to-day business and identify any immediate funding needs. A medium-term cash flow forecast will cover any time between a month and a year ahead, whilst a long-term cash flow forecast will look even further into the future, from one year to five years, or even longer if necessary.

There are different types of cash flow forecasts for different business needs. One company might want to predict when a surplus of cash will be in the bank in the next few months so that they can prepare to use it to grow their business. However, another company might be repaying a debt on a weekly basis and need to know they have the money to do so.

It’s crucial to get the right kind of cash flow forecast, which is where we can help.

How Can AK Tax Help With Cash Flow Forecasting?

If you’re new to the process of cash flow forecasting, it can seem overwhelming. Our friendly and professional team can step in to create a cash flow forecast that takes into account your business objectives and your management team’s or investor’s requirements. We can create a cash flow forecast for you, or help you develop one yourself, and then advise you on the next steps to take, whether that’s making business decisions or accessing funding. Most of all, we’ll give you the peace of mind of knowing that your business is in safe hands.

Get in touch today to find out how we can help with cash flow forecasting and many more aspects of running your company.


Cash Flow Forecasting FAQs

How useful is a cash flow forecast?

A cash flow forecast arms you with the information necessary to make important
decisions about your business, so it is incredibly helpful. A forecast can help
you answer the following questions:

  • Do you have the funds to start selling a new product or offering a new
  • Can you afford to take on a new member of staff?
  • Can you expand and start renting a larger office or work space?
  • Can you outsource some of the day-to-day tasks that distract you from
    growing your business?
  • Is your company at risk of running out of money?
  • Do you need to borrow some money?

If you are able to predict the answers to these questions, you will be able to
steer your business in the right direction with confidence. If you aren’t able
to make educated guesses about where your finances are headed you won’t be able
to take control of your company.

What should a cash flow forecast include?

A cash flow forecast needs to contain as much data as possible from bank
accounts, accounts payable, accounts receivable and management teams. Though
forecasting cash flow is within the remit of a business’s finance team, building
an accurate forecast requires input from a wide range of data sources and
employees within a company. The data should be broken down into cash inflows and
cash outflows:

Cash inflows:

  • Accounts receivable
  • Expected earnings from sales
  • Sales of company assets
  • Loan advances
  • Investments

Cash outflows:

  • Accounts payable
  • Employee wages
  • Operating expenses
  • Loan payments

The more data you have, the easier it will be to develop an accurate forecast.
At AK Tax we can advise what information you need to find to start developing a
cash flow forecast that will help your business thrive.

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