If you mention forecasting in mixed company you can see a small shudder run around the room.
Many business owners don’t know how much money is in their bank account on a day to day basis and look at their accounts only once a year, so the idea of forecasting for the future leaves them cold.
However, in not doing cash flow forecasting (at the very least) these business owners are putting their businesses at real risk.
Until 2008, when overdrafts were pretty easy to come by, you could get away with not managing your money quite so well. But now the banks are reluctant to lend money, businesses that don’t ensure they control their cash flow can find themselves really struggling – even if they are profitable.
Forecasting forward can help ensure you don’t suddenly run out of money. If things are going badly you at least have forewarning of when you MUST get some money in and have time to do something about it. You can then use your forecast to help the bank – or any other parties you are hoping to secure funding from – understand your business and who investing in your business is a good bet for them.
I have written a free guide to help you with forecasting for your business which you can download from my website http://www.fionabevanfinancialmanagement.co.uk/guides.php