A good cash flow projection is probably the most important piece of a business plan. All of your marketing, advertising, staff, and other ongoing business activities are nothing without the money to pay the bills. Cash flow projections help predict the future operations and understand the true profitability of the business.
But not many businesses are aware of their exact cash needs. This is best done in a detailed way; forecasted ahead of time as a month by month basis. It is much more than just looking at your yearly projections. A month by month cash flow projection will help your business keep afloat at hard times.
Much like a map helps you to plan a journey, a financial forecast helps you to set your goals and carve a path you are going to go.
If you have a business plan with set goals in place, a cash flow projection can help you to control your everyday spending in addition to controlling your long-term expenses. In a case of expansion, it allows businesses to distribute their resources without putting pressure on their bottom line.
2. FUTURISTIC APPROACH
A forward-looking forecast can help you keep track of your long-term view of your business. This type of forecast can help you see what expenditures need to be made to grow your business in the long term while keeping all of the existent issues at bay.
3. FORECASTS FOR INVESTMENT
Lenders and investors still look at your financial plan, and one of the most solid pieces of sound financial future is a forecast.
4. IT CAN HELP YOUR MARKETING
A cash flow projection will show you which trends and how much demand has been generated by your marketing and advertising campaigns. A forecast will provide you with the information you need to know if the strategies you’re putting into place are actually delivering increased revenue or not.
5. IDENTIFY HARDSHIP
A good cash flow projection can help you predict when the bad times are going to strike and how. A good forecast will identify the potential issues with your expenses, overheads and income and many different scenarios before it happens!
6. SPOT TRENDS
A solid forecast can show you which items sell the best at which time, and help you capitalise on those trends. You can create more campaigns and capitalise on them while one item is popular and reduce the stock of the one that isn’t.
Even at the best of times running a business is hard. Managing the finances of a complex business model is difficult enough, and it is easy to lose track of your bottom line. A forecast can give your business a solid foundation for success.