To ensure a business is successful, it will need a strong foundation. Part of that foundation is forecast management. Forecasting, budgeting, and managing cash flow are all essential for success. Predicting when things are likely to occur will help ensure you have the income to cover expenses. It’s part of managing how and when finances flow in and out of the business. Forecast management is part of being fiscally responsible.
Controlling Factors
It’s important to have control over the business’ cash flow. This is necessary to ensure the business remains open and above water. Some of the control factors pertaining to cash flow include:
- Failing to pay bills when they come due can deplete cash and put you in a bind later on.
- Making sure clients pay you on time so you can pay your bills
- Maintaining processes that protect your cash and assets from being misappropriated by employees or members of management.
Once you have your controls in place, you’ll need to create a budget. Budgeting lets you use strategies and goals to predict more profitable months. This is where forecast management comes into play as you begin to combine your budget and actuals and project when and if you’ll reach your goals. This is after you factor in sales and purchases to date. Forecasting lets you see cash flow trends which allows you to make changes in your strategies where needed.
Trends and Insights
When you begin to see trends in cash flow, you’ll gain the insights needed to successfully run the business. It’s not solely profits and losses. Forecasting helps you see the effects of each financial decision you make and how they affect your business’ numbers. It makes tough decisions easier knowing you can handle the outcome. To make progress as a business requires monitoring metrics and having a solid financial management system in place.
