You probably already know you need to pay attention to your cash flow, but do you know why? Or how to use the information in a cash flow forecast? Your cash flow is a vital tool to help you see the strengths and weaknesses of your existing activities. It also helps you to plan ahead, whether you are considering purchasing new equipment, expanding your operations, or introducing new product. A cash flow statement is a summary of the movement of money into, out of and within a business. It will cover information on operational activities, investing activities and financial activities. It generates a snapshot of the operation of your business and its value. This is vital information for any business, but especially if you’re thinking about selling or approaching investors. The cash flow statement also helps you identify structural problems in your business, like invoicing time frames being too long to cover your overheads. The statement helps identify cash shortfalls or surplus down the track. It can also help you prepare your tax returns.
Cash flow forecasting and predicting the future
You don’t know what the future holds for your business, but you can make an educated guess by using your cash flow data. You’ll be able to make smart decisions on whether to put off a purchase or determine if you need to secure a loan to help cover any shortfall. If, for example, you’re considering hiring an extra employee you can plug that salary into your cash flow forecast. That will give you a good idea of the financial effect on your business and whether you can afford to hire someone. You can also use your cash flow forecast to think about what you might do in best and worst case scenarios. Do you know how your business will manage in tough times? Have you earmarked extra cash for a particular purchase? All this information helps you make the best decisions, no matter what happens. One terrific benefit to using a cash flow forecast is it’s a great tool for dreaming about future possibilities for your business. Don’t be afraid to plug in some of your big hairy, audacious goals into your cash flow forecast. You might find out it’s a great way to get motivated about growth.
Goal setting for your business
To make the best use of your cash flow forecast, you need to know what business goals you want to achieve. Your cash flow statement is the baseline information you can use to set realistic goals. You can see how achievable your goals are, what you need to accomplish and in what time frame. Using Agrimaster you can also develop risk assessments for the future of your business. Knowledge is power and having the big picture at your fingertips will give you the confidence to make big business decisions. Contact us today to get started with Agrimaster and see how your business can benefit.
