How to put together a cash-flow forecast

If you own a business, you want to know exactly where your money is going. Having money slip through the cracks is a waste. If there was a way to make sure that this didn't happen, wouldn't you want to know about it? The money that is leaving your business is called cash-flow. Wouldn't it be nice to not only know what the cash-flow is now, but to have an idea of what it will be in the future? Think of all the things you would be to be prepared for. You would know how high to set prices, where to go to for better priced materials and how much to money you would make afterwards. Knowing an idea of these things is not magic. In fact it is just plain logic. Using the numbers and figures that are being kept in your business book with a little investment into market analysis will help unlock a forecast of your business's cash flow.

The first thing to do when creating a cash-flow forecast is to know exactly where funds are coming from, going to, and how much profits are being made. All of these things should be written down into a financial book. This book is valuable in that it has not only all of this information, but it protects from business fraud and if it is kept well, will be the deciding factor later on if you decide to sell the business, whether or not they will buy the business. From these numbers of how the business is doing, make a report that can be easily referred to in a meeting with an accountant.

Next, invest in professional market research. Most small businesses fall for the idea that they aren't big enough to take advantage of market research. This is a folly plus one. Studying market research reveals which trends in the market are going in or out. It shows what kinds of things people are buying more or less of. It is pretty much the newspaper of the marketplace, your business world. If you never read the news ever, you would probably walk around doing things a little differently then if you'd know about what was going on around you. It's the same way with market research. Take this data and start analyzing what you see. How does it apply to your business? Find all the ways that it does apply. With the use of market analysis, you will know how things are working in the real world.

Finally, it's time to use these to things to make a cash-flow forecast. With the information that you have learned about your own company and what is going on around it, now you can extract information that will help make an accurate prediction of how much money your company is going to have to spend to make its product, pay its employees, and run everything else, also known as cash-flow. Now that you have your forecast made, you can decide how prices will have to change in order to keep the company in a good position. All of this can be done with the help of a separate agency, or can be done all on your own with software that helps keep track of numbers and figures. Don't be afraid to work hard for this.It will greatly benefit the future of your company.

There are other sources that walk through each of these things far more in depth than this article has the capacity of doing. These are the bare bones and greatly simplified explanations of how to do it. Now it is up to you to move forward and make that cash-flow forecast.