Cash flow forecasting can pave the way for the road to success. It enables you to see your company’s incoming and outgoing funds in such a way that you can anticipate any future obstacles you may encounter and deftly avoid them while growing your business. However, for many business
owners cash flow forecasting is a nightmare.
Inherent Difficulties with Cash Flow Forecasting
Many business owners struggle with cash flow projection because they are uncertain about the information they need to input, or they are having difficulty finding it. But it’s worth taking some time over because when handled correctly, it will allow you to assess if and when your company needs to take out a loan, how much, and how you can best repay it.
Some of the common difficulties creating a cash flow projection include:
You Have Insufficient Information at Hand to Produce a Cash Flow Forecast
This problem usually arises because you don’t have the best accounting software solution. What you need is a bookkeeping software program that will provide you with these essentials:
- Balance sheets
- Financial statements
- Cash flow projections
- Inventory management
- Generating invoices and estimates
- Sales tracking
- Budget planning
- Payroll management
- Taxation essentials
Having all this information in a single software program can make generating your cash flow projection much easier. QuickBooks is a safe and reliable program that is great for small businesses. It will help your company grow.
There are Errors in Your Financial Data
This can be a huge problem. It can ultimately lead to a taxation nightmare if you end up reporting your financials incorrectly. You need to be able to avoid miscalculations altogether or at the very least, find them early on. The best way to do this is to keep your bookkeeping statements as clear as possible. Keep your financial information organized. You won’t be able to do this if it’s scattered in paper files. It’s no good digging through to find what you’re looking for. You need to be able to access the information at the touch of a button. This is another reason why you need a software solution; everything is on hand when you need it.
You’re Not Producing your Financials Often Enough
Many start-ups and small businesses make the mistake of producing their financial statements on a quarterly or biannual basis. This is a no-no if you want to be able to create a realistic projection. You should be producing your financials monthly. Yes, it is worth the extra effort. It helps you see exactly where you are. It also shows potential investors that you are monitoring your business closely.