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Predicting Your Cash Flow with Financial Forecasting

Published by Jamie Nau on 22 Sep 2017

Business owners know how important it is that a company generates a positive cash flow in excess of invested cash in order to keep the business going. If not, you may find yourself closing up shop sooner than you think. A great place to start is a financial forecasting statement.


What is a financial forecasting statement?

A financial forecasting statement
will measure the company’s ability to generate cash flow. It gives you a way to measure any success or failures against your target. This statement will allow you to have a second look at your financial and management decisions so that you can make changes where needed in your future planning to keep your company on track.It's important to remember, however, that financial forecasting is not error free.

Here are four ways you may be able to avoid some errors when reviewing your financial forecasting statement:

  1. Understand Where Income Projections Come From. This income is the amount received from the business operations. When there are projection errors, it can have a huge impact on cash flow. Your financial team will build projections using things such as pricing, products, and volume. Using these basics will provide a more secure idea of the performance operation of the company while raising any relevant questions along the way.
  2. Be Aware of Accounts Payable and Receivable Changes. Payable and receivable accounts should be set at ideal levels and then forecasted according to your financial strategy.
  3. Set Policies Around Finance and Investment Cash Flow. Predicting these cash flows can be quite difficult and requires a high level of expertise. The most reliable way to handle this is to set policies in the sections of acquisition and disposal of your long term assets, as well as other investments that are not included in the cash equivalents nor in any activities that would result in changes to borrowing or equity. Be sure to follow through with your strategic plan.
  4. Stay Up-to-date on Tax Laws. There are always changes in the tax codes. Hiring a reliable and experienced CPA firm will ensure that all of your tax matters are up to date before they have a chance to become an issue.

For more tips contact our office at (260) 497-9761 to schedule an appointment with our advisors. At Summit CPA we offer multiple resources that will help get your business on the right track. By utilizing our Virtual CFO we have the capability to assist you virtually anywhere in the USA.


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