You need Budgeting
An essential habit is to set a budget at the start of the year as this will enable you to assess how much cash you need in any given week or month. A budget will highlight times (eg seasonal variations) when cash gets very tight and either careful cash management is needed or you may need to borrow. The important part is that you know in advance when issues will occur so that you can start planning early which will in turn minimise problems later.
You need Forecasting
You will also need to have cash flow forecasts on a weekly or monthly basis. No business, no matter how big or profitable, will stay in business for long if it simply doesn’t have the cash in the bank to pay the bills when they need to be paid.
A business should prepare profit forecasts on a regular basis so that it knows if it is on track. If the forecast shows the business is likely to be going off track then because you know now, corrective action can be taken sooner. Businesses and markets are always evolving and forecasts can be used to highlight these changes and their impacts – the important thing is ensuring your business responds and adapts quickly to ensure that it stays on track.
Posted in: Business Issues
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