Cash Flow Software

10 Advantages of Cash Flow Forecasting Using Software Specific for the Task

By Russell Bowyer

10 Advantages of Cash Flow Forecasting software

10 Advantages of Cash Flow Forecasting

10 advantages of cash flow software

It is that time of year again when companies both big and small look to the New Year and begin to prepare their budgets and financial forecasts. In this article we look at the 10 Advantages of cash flow forecasting software and at the time of writing we are looking forward to the 2016 year.

Hopefully your forecasts will involve growth and projected profitability and progress for your business, but forecasting is about planning for a good outcome, rather than leaving it to chance.

So here are a few tips to give your business the advantage it needs when you are cash flow forecasting:

1. More time on the plans and forecasts, less time time working out the Excel spreadsheets.

Most accountants love to pour over endless spreadsheets. Business owners usually require their accountant to prepare cash flows plans for them. But wouldn’t it be wonderful if you could save all that time and cost, without the need to check that the formulas in your spreadsheets work, that all your reports are correct.

You can spend your time working out what your forecasts should look like, you can deliberate over your level of sales growth, and review the numbers produced using a program designed specifically for preparing cash flow forecasts, and at a cost which is a very small investment.

By taking control of your own cash flow forecasting, there will be no need to wait for someone else to do them for you, which would be at a cost far in excess of the small fee for Cash Forecaster.

2. You can spend the time you saved on reinventing the wheel on other more important tasks.

When you use specific forecasting software, which above all must be easy to use and easy to interpret, you are not wasting any of your valuable time, which can be better spent either on fun things, or on beginning to work on making the plan and forecast happen for next year.

3. Removes some of the guesswork and the risk.

A large part of financial forecasting is predicting the future and what your business sales will be. You don’t want to increase this risk of getting your future sales wrong by spending time working out whether your spreadsheets add up.

There is plenty of risk involved in running microbusinesses or SMEs so you want to minimise the level of risk as much as possible.  This is where software designed for the task makes cash flow forecasting easier and helps to remove some of the guess work. You can spend more time analysing the numbers, rather than spending your time worrying if everything balances.

By having accurate forecasts to hand, you can quickly see any impact on your cash flows, way before you commit to any investment decisions. You will be able to focus your thoughts and energy in the right place.

4. Easy to review various scenarios.

Having cash flow forecasts that are quick to prepare, will allow you more time to play with various scenarios. It is important to know, for example, what is your break even point. It is also good to run a few worst case scenarios, or even some best case scenarios.

You can accurately forecast what you hope your next year sales will be, but what if this was 10% lower, or perhaps 20% lower. What if your cost of sales were to be higher by 10% or more!

How will these various outcomes affect your profitability, but more importantly your cash flows? By having cash flow software that can quickly change your numbers at the touch of a button, will prove invaluable and it will save you an enormous amount of time.

However, what is more important is that you stress test your cash flow forecasts, before you commit to your new plan.

What you might also want to test is what would happen if your payroll cost were to increase, by taking on more staff. What would happen if you changed your prices, what impact will that have on your profits and cash flows? What if you changed your suppliers, or if you moved premises? How will all of these things impact your business?

This leads me on to making a note of our Increase Profit Software also, which not only helps you to target your key profit drivers, but the software also comes with a price sensitivity tool also. Our Cash Forecaster Software together with this tool and the a Profit a Increase Software, work well together.

By having the right tools to hand will mean your spending your time efficiently and effectively.

5. Improved decision making.

Having professional financial forecasts and reports, helps you to make better decisions, and better informed decisions.

Making the right decisions is not just about the decision you make, it is also about asking the right questions in the first place, in order to make that decision, whilst at the same time as having good information and figures to hand to direct you to the right answer, which will hopefully be the best one for the future of your business.

6. Updating your plans as you go.

Just because you have run your cash flow forecasts, doesn’t mean it has to end there, because as we all know things don’t always go to plan. Staff change, we may not get that contract we had budgeted for, our suppliers may put their prices up, which may or may not have been in one of the scenarios you ran.

So what needs to happen is that you adjust and adapt your forecasts, as you go. Adjusting your numbers should be an easy process, and easy to do.

7. Regular cash flow forecasting highlights potential problems.

Cash flow forecasting will highlight any cash flow blips before they occur, giving you the time to prepare, or if required, to arrange the necessary finance to cover any short fall.

This type of planning is particularly necessary for smaller businesses which don’t have cash reserves to fully cover the ups and downs of business cash flow.

Banks prefer you to be organised and you are more likely to get banking support for your business, if you go to them in good time, although currently, as I write this blog, it is still difficult to raise bank finance. However, there is a growing market of alternative finance, including crowd funding, where you are more likely to get funding for your business these days.

8. Better management reporting and control

Where you have management within your business, having a business plan, which is supported by strong cash flow forecasts, it makes it easier for your management team to run the business, and to know their parameters of expenditure, together with what the targets are for each department.

Also, by having set out your plan and cash flows, it makes sure that you stay within your agreed payment terms with your suppliers, to better maintain those relationships. Good supplier relations are key to running a successful business.

9. Build investor confidence in your business.

If you are seeking investment finance within your business, having a well prepared business plan that is supported by sound cash and profit forecasts, is crucial.

An investor needs to have confidence that they are going to get a return on their investment. An investor needs to be reassured that the return on investment they are looking for will be met by the business.

With this in mind, having well prepared cash flow forecasts with professional looking reports, will go a long way to smoothing the way to securing that investment.

However, never under estimate that investors are always looking for business owners with a passion for their business , so no matter how well prepared your cash flow forecasts and business plans are, if you are not passionate about your business, securing investment will be an up-hill battle.

Having said that though, by using Cash Forecaster, you can print professional reports to demonstrate to them that your business plan works, with the confidence that the figures balance. You could also include the various scenarios you have prepared, to show them that you have considered the various outcomes, thereby demonstrating to them your responsibility and commitment to masking this happen.

10. It is better to plan and forecast, rather than not to and fail.

“Failing to plan is like planning to fail”, so planning ahead is setting your goal and it is about your personal and business target. If you have a target, you have something to aim at and it is a known fact that businesses with a business plan succeed more often than those that do not write a business plan.

So begin by preparing your cash flow forecasts and then update these on a regular basis. There are a number of program’s that will help you to prepare your accounts, and some include cash flow software, but Cash Forecaster is not only easy to use and has many features, but it also comes for a small £79 fee too.

As always thank you for taking the time to read my blog and if you like what you’ve read, please share it with others.