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Three Tips to Stay Up to Date on Cash Flow in Your Business


Three Tips to Stay Up to Date on Cash Flow in Your Business


Cash-Flow---Dollar-Signs-Coming-Out-of-TabletIf you're one of the vast majority of businesses feeling the impact of the coronavirus pandemic, these are unsettling times. One way to protect your business' health is to regularly monitor and forecast your cash flow.

With that in mind, here are three tips to ensure your cash flow keeps pace with your business goals.

1. Review Your Cash Forecast Every Week
A cash-flow forecast is just that. It's a projection of how much cash you expect your business to have in the near future based on the information you have today. Simply put, cash flow is projecting your:

  • Cash In: sales, collecting accounts receivable, investments/loans
  • Less Cash Out: accounts payable, operating expenses, payroll, R&D expenses, sales and marketing expenses, owner’s draws, loan repayments

Many businesses create annual budgets that, as the terms suggests, include a forecast for an entire year. Established businesses also implement long-term goal planning, usually three to five years, often relying on a Chief Financial Officer to devise financing strategies for reaching those goals. Shorter term, a typical cash-flow forecast covers a quarter of the year, or 13 weeks.

When changes are happening quickly, I recommend updating the rolling 13-week cash forecast every week. Doing so will enable you to take changes into account and make business decisions based on fresh data and analysis.

2. Tell Your Bookkeeper What's Happening 
You can prepare for potential problems by sharing current information and talking through various "what-if" scenarios with your bookkeeper. Meet with your bookkeeper each week to discuss any changes that have occurred over the previous seven days. Your bookkeeper will add this data to the rolling cash-flow forecast. With this financial insight, you can transform information into action. For example, if the big project scheduled to begin next month is delayed for three months, your cash forecast will reveal which expenses you'll still need to pay without that revenue coming in — and whether you still have the resources to do so.

3. Establish a Line of Credit
Every business must be prepared for unexpected changes in revenue and expenses. Suppose your cash-flow forecast for the next quarter shows your business will have only enough cash to pay expenses for the next two months. In that case, you'd need to figure out how to avoid missing payments in that third month — an eventuality that could damage your credit and stunt your growth, if not derail the business altogether.

If your business wasn’t fully prepared for this downturn it’s not too late to get emergency funding. Your cash flow forecast will help you know what you need to bridge the gap.

Stay Up to Date on Your Cash Forecast
With bookkeeping services to assist with careful planning and regular cash forecasting, you can anticipate changes to your cash flow and prepare accordingly.

Earle Durham


Earle Durham

Earle Durham, Managing Director, Supporting Strategies | Merrimack Valley, MA & Southern Maine, provides outsourced bookkeeping and controller services.

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This website is created by Supporting Strategies to provide general bookkeeping and accounting information only. Supporting Strategies does not provide tax, legal or accounting advice, and the information contained herein is not intended to do so. As such, the information provided should not be used as a substitute for consultation with professional tax, legal, and accounting advisors, and you should consult with a tax, legal and accounting professional before engaging in any transaction.