Small business owners often face tough financial decisions on a daily basis. The pressure and risk involved can be overwhelming, but thanks to cloud accounting and advanced financial reporting tools, things are improving.
In particular, online cash flow forecasting solutions have significantly reduced the financial stress for many business owners.
However, some still overlook the benefits of using cash flow forecasting software. Here’s a breakdown of why every business owner should consider using one.
What are the advantages and disadvantages of a cash flow forecast?
Cash flow forecasting is a vital part of strategic business planning. It can be done through several methods, with spreadsheets being the most traditional approach.
But what are the key benefits of a cash flow forecast for your clients?
Understand the impact of future plans and possible outcomes
For many small businesses, a single overdue invoice can cause a dramatic drop in available cash. Scenario planning allows business owners to model different outcomes and see how various future events could affect their finances. This insight is a powerful tool that boosts confidence when making important decisions.
Keep track of overdue payments
Chasing late payments is one of the most frustrating tasks for business owners. Gaining visibility over late payers and their impact on cash flow helps highlight the need for stronger credit control.
To improve this, tools like GoCardless for direct debits and Chaser for debtor follow-up can be helpful.
Plan for upcoming cash gaps
Spotting cash shortfalls before they occur enables business owners to take proactive steps. This might include shortening payment terms, applying for loans, or exploring alternative finance options—actions that can help close any financial gaps.
Manage surplus cash
Though rare, having extra cash in the bank presents opportunities. Whether it’s reinvesting in growth or paying down debt, knowing when a surplus will occur allows for smarter financial decisions.
Anticipating when and where that surplus will happen enables better planning and use of funds.
Track whether spending is on target
Every business has financial targets tied to timelines. Cash flow forecasting helps business owners see whether they’re on track to hit those goals.
By tracking actuals against budgets, forecasting improves budgeting accuracy and helps make better financial decisions based on real-time data.
Invest time in good governance
Investors and stakeholders usually look at the bigger picture, rather than day-to-day operations. They expect business owners to do the same.
Maintaining a detailed cash flow forecast—including best, worst, and most likely scenarios—builds trust and accountability. It also makes it easier to attract or secure additional funding if required.
Offering clarity on future financial health is crucial for building investor confidence and long-term business sustainability.
Save time over a spreadsheet using online tools
Creating a cash flow forecast manually in a spreadsheet can be time-consuming, especially for those without financial expertise. Cloud-based software simplifies the process, making it quicker and more efficient.
These tools save both time and money, and make cash flow planning more actionable and less overwhelming.
Benefits of cash flow forecasting infographic
Understanding the difference between profit and cash flow
Cash flow forecasting helps clarify the distinction between two critical financial measures—profit and cash. Knowing the current and projected cash position is essential to understand how much money is readily available at any given moment.
For those less financially inclined, spreadsheets can be confusing. But using collaborative, cloud-based tools along with financial advisor support can ease concerns and provide peace of mind.
With more businesses now using platforms like Xero and QuickBooks Online, integrating forecasting tools has never been easier.
Float for cash flow forecasting
Float makes the cash flow forecasting process more intuitive and visual than traditional spreadsheets. By comparing budgets to actual figures, Float offers a clearer picture of cash availability—helping business owners assess their position quickly.
Its ability to generate multiple “what if” scenarios makes it a valuable tool for long-term financial planning.
Cash flow forecasting encourages clarity and confidence, helping pave the way for a successful and sustainable business future.
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