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Forecasting Your Cash Flow

Published by Jake Grimm on 08 Mar 2019

When you own a business you understand the importance of generating positive cash flow that is in excess of your invested cash to keep your business running smoothly. Those that don’t understand the importance of positive cash flow could find themselves closing up shop sooner than later.business cash flow_figure_money_falling_13444

So, where do you start? A great place to start is creating a forecasting statement. This statement will measure your business’ ability to generate cash flow. The statement will provide you a way to measure your success or failures, against your target. It will provide you a second look at your financial and management decisions. This second look will allow you to make any necessary adjustments in your future planning and keep your business on track. However, it's important to remember that forecasting is not error free. Below is a list of items that may help you avoid forecasting errors.

1.) Income. This is the amount of income received from your business operations. Your financial team can build projections using the basics such as, your pricing, products and volume. This will provide you with a more secure Idea of the business’ performance operations all while raising any relevant questions. Note: Just remember, any projection errors can have a huge impact on your cash flow.

2.) Financial and investment cash flow reporting. It can be challenging predicting these cash flow reports and will require a high level of expertise. The most reliable method to handle this is to set policies in acquisitions and disposal of your long term assets. Also, include any other investments that are not included in cash equivalents nor in any activities that would result in changes to borrowing or equity. Then, be sure to follow through with your strategic plan.

3.) Payable and receivable changes. These accounts should be set at ideal levels and then forecasted according to your financial strategy.

4.) Tax liabilities. There are always changes in tax codes. It’s important that you hire an experienced and reliable CPA firm. This will ensure that all of your tax matters are up-to-date before anything becomes an issue.

At Summit CPA we offer multiple resources to get your business on the right track. For more tips contact our office at (866) 497-9761 to schedule an appointment with our advisors.


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