I recently did some work for a client who was extremely stressed and worried about his money situation. Having always managed his business based on ‘gut feel’ and experience, he had a number of crucial decisions he needed to take in order to progress his plans to grow his business.
Procrastination and fear of the unknown was actually affecting this ambitious business owner and in true entrepreneurial spirit his gut reaction told him now was the time to seek help and FAST!
I was contacted via email and after a phone call to outline what he needed, within 24hours, I had produced a 12 month cashflow forecast for his business which helped him with modelling the impact of aditional recruitment and investment on his bank balance going forward. No great shakes you may think, but this business owner only had yearly accounts prepared by an external accountant and no idea how much profit he was making on a monthly or weekly basis. Infact, his lack of foresight into how much money he had going forward, had meant he had, on occasions, felt the need to put money from his personal savings into the business bank account.
By looking at the forecast I produced, this business owner now felt comfortable enough to take the decision to recruit a sales manager. Furthermore he was able to assess how much he could afford to pay him and he could also model what targets he needed to set for increased sales and to what timescale.
Cashflow forecasting can be done in stages and the first stage is to answer the question
“Am I making money?”
Afterall if you are not, surely your actions should be around turning your business model into something that does make money, rather than trying to grow and make even bigger losses!
My approach to building cashflow projections answers the first basic question and does not require monthly accounts. Simply download 6 to 12 months bank statements and using a basic spreadsheet split out your incomings and outgoings. Patterns will start to emerge as you see your regular outgoings and the pattern of income. Predictions on payroll costs, NI and PAYE and the dreaded vat should all be calculated and extrapolated forward.
This is a cashflow forecast based on the historical and then projected forward.This first basic bit of management information will help you to think about the actions you need to take in moving your business forward.
If you require quick and focused help in building a cashflow projection for your business please get in contact now via the details on my website.