How to: Cash Flow Forecasting

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Hi, this is Judi Otton with GrowthCast and today I’m going to give you a little insight into how I do what I do. Specifically, I’m going to talk about cash flow forecasting. Last time I shared a little story ( about one of my businesses is getting caught a little short and getting surprised with a cash flow crunch and I’ve heard from a few of you and I know that it’s happened to many other companies. So this is something I think all business owners need to be doing and stay tuned because I have a little gift for you at the end of this video. So I do this in Excel. The first thing that I do is I look at my inflows, the money that I expect to come have coming in and I start with my accounts receivable. Look at the payment dates, but you also want to consider , when do those customers actually pay? You may know that this customer really pays at 45 days or that customer pays all their bills at the end of the month. So make allowances for that , as you’re predicting the dates that you’re going to get those inflows and you’re going to put that in each column. This is a weekly cash flow forecast. So you’ll put each client payment in the column of the week that you expect it. Next, we’re going to move to outflows and the first section is going to be the things that are not movable. These are either payments that have to be made on time or they’re ACH’s that are going to come out of your checking account whether you do anything or not, on a specific date. So you know the dates that those are going to occur. So put those into the appropriate weeks, each each vendor on a different line. Then finally we move to the discretionary payments. And when I say discretionary, it means that you have some more flexibility on when you pay those. Rank those by the order of importance of the vendors. So for example, I worked with a bakery for a long period of time there flour vendor was really, really important. You can’t do a whole lot without flour. So we were always in terms with that with that company. So slot those payments, add up all the inflows, add up all the outflows, subtract the outflows from the inflows and that will show you either your excess cash for the week or your cash shortfall for the week, which means you either need to transfer money from somewhere else or you’re going to need to juggle a little bit and this happens. Don’t get upset. It happens. You might need to push something to the next week if that’s what’s going on. This may be really hard to understand in a video. So I would like to offer you the cash flow template that I use with my clients and it’s it’s an Excel spreadsheet with lots of formulas to calculate your ongoing cash flow needs. If you’re interested, reach out to me through any of my social channels or my website and I’ll be happy to give that to you free of charge. This is Judi Otton and with GrowthCast and I’ll be back next week with a Fiscal Fitness Tip of the Week.

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