How to prepare a cash flow forecast in your business plan

[jrineakter]

It is easy to understand why treasury is one of the most important areas of any company. After all, it regulates all the monetary operations of a business and oversees cash flow, controlling the funds available in the company at all times… And also making a prediction of the future which, for everything to work as it should, must be as realistic as possible.

This is precisely what is usually called cash flow forecasting: a necessary plan with which a company can (and should) visualize payments and collections and, in this way, anticipate its economic future. The idea is to foresee situations of economic risk and act accordingly.

But above all, the purpose of any cash flow forecast is to make the right decisions to obtain greater benefits. Sounds appetizing, right? Well, in this article we put forward two possibilities when it comes to preparing your own cash flow forecast and starting to walk firmly towards that ultimate goal.

Use a spreadsheet
The first option is the basic and classic one: a spreadsheet. It can be Excel (with its increasingly better teamwork options), Google Drive (and its cloud management possibilities)… Or it can be the technology of your choice, but it is clear that a spreadsheet is the basic starting point for any cash flow forecast.

The idea here is to optimize the forecast of payments and collections, so our spreadsheet should differentiate them and arrange them separately. A single glance at this spreadsheet should be enough to know what payments and collections your company will receive in the coming months.

On the one hand, you must have a solid payment forecast. Of course, bearing in mind that the most common thing in this case is not to pay immediately, but to establish a australia number data payment period agreed with your clients. The longer this period, the greater the control you will have over your payment forecast and, above all, the easier it will be to meet them with solvency.

On the other hand, the collection forecast is the heart of the treasury plan . This will be the cash flow that will make your company solvent and able to face all treasury challenges. This is why it is vitally important to also agree with your payers on a due date for invoices… Although, in this case, the shorter the due date, the better. And there is no need to explain why, right?

Use dedicated software
Spreadsheets are very effective, no one can deny that. But it must also be acknowledged that times have changed and that, today, it is much more effective to deal with treasury management and its forecasting using some type of dedicated software (such as Holded, for example ) .

The right software will take the basic functionality of spreadsheets and take it to a new level of sophistication that will benefit from a whole set of automated tasks that you can completely forget about. Following the example of Holded, this software will allow you to not only keep track of payments and collections, but will also offer you the possibility of connecting your banks (to have them centralized), controlling your bank reconciliation, accounting for your purchases completely automatically...

In other words, using dedicated software takes the basics of cash flow forecasting to a new level, which in turn brings your company closer to the goal we talked about above. Remember that? Yes, to make more profits.