I Predict Money!

I Predict Money!

What is cash flow forecasting? Cash flow forecasting is basically a method of working out how much money comes in and goes out of a business. This is one of the basic principles of business management. For without money, what can you do? Not much. No money, no business, it’s that simple.

Why?

Why is cash flow forecasting important? Well, it’s important because you need to keep track of all your income and expenditures. If you are ‘spending money like water’ and you don’t keep an eye on what you are spending it on or how much you are spending, you can get yourself into difficulties later down the line. Having a proper cash flow forecast will prevent you from having to declare yourself bankrupt because you have no money to pay your bills with. If a bank sees that you are not paying attention to things like this, they will be less inclined to help you if things go wrong.

Who Does What?

If the business in question is a small to medium sized one, or a start up company, the type of cash flow forecast needed will not need to be as detailed or complicated as those for larger organizations. That does not mean to say that because a business is smaller there is less to go wrong, all sizes of business can get into the same difficulties if cash flow is not charted and maintained properly. So for a start up company, all you may need to do is get an accounts ledger and write down your income and expenditure. Don’t forget to include the sources of where the money came from and where it went to. Accurate record keeping in business is essential. For multi-million dollar corporations, cash flow forecasting is more detailed and can involve computer programs like those offered by Up Your Cash Flow.

Ways And Means

There are different methods of cash flow forecasting which are suitable for different situations. Called direct and indirect methods, the size of your business will determine which one is right for you.

The direct method is normally used to forecast finances from between 1 month up to 1 year. The forecast is calculated by using all the receipts and financial documents that the business actually has and all the expenditure the company will make. Ergo, it’s directly based on what is already there. Indirect methods use a company’s projected income and outgoing statements to calculate the forecast. The process looks at the difference between the fixed and variable costs. This then determines what cash flow is needed.

Nowadays, there are computer programs, like those offered by Up Your Cash Flow, which will do all this for you. Gone are the days when you had to solely rely on an accountant or a financial expert to calculate things like this for you. With a bit of time and knowledge of how the software works, you can get the computer to do all the hard work for you leaving you with more time to dream up new ideas for making even more profit. It’s a win-win situation all round!

As seen on his G account, D. H. helps administrate an internet marketing firm. He lives in sunny California, and gets a kick out of making use of visitor blogging to help the world of commerce.