Ever have your bookkeeper come to you and say… “if I pay those invoices you told me to take care of… we’re going to be short on payroll this week. What do you want me to do?”
If so, you probably made some quick, knee-jerk adjustments to your payables, got your people paid (of course), and went back to your desk and asked yourself… “How the h*** did this happen again?”
Wouldn’t it be great if you could have an advanced warning for when your cash flow was going to be tight instead of having it punch you in the face at the last minute? Well, you can. In fact, you can know what your bank balance(s) will be at 5:00 pm on Friday… for the next 13 weeks!
How?… With a Cash-Flow Forecasting Tool
There are Cash Management Systems available that will forecast your cash on hand at the end of each week for 13 weeks/1 Qtr., in advance with 90% accuracy. They give you the ability to know your cash-on-hand position well in advance of any potential shortfalls so you can adjust your expenses and payables long before your bank balance becomes a “fire” that forces you to drop everything to deal with.
A good Cash Management Tool will be a robust Excel-based spreadsheet that while rich in complexity and capability, is easy to operate and manage for you and your bookkeeper. Perhaps its most important feature is the ability to “play what if” scenarios with your A/R and A/P. The spreadsheet should give you the ability to easily toggle back and forth between dates with your payables. This will give you a good picture of what your ending balances will be 3 months down the road based on who you pay, and when. That makes a Cash Management spreadsheet a terrific budget analyzer and creator as well.
I highly recommend you create or find a Cash Management/Cashflow Forecasting Tool for your business because it will give you a level of control and oversight of your finances (CASH) that you never knew was even possible. As important as traditional financial reports are, such as your P&L, balance sheet, AR, and AP aging reports, those reports are usually only weekly or monthly (if at all).
Once you and your accounting team become proficient with good quality Cash Forecasting software, you will find yourself referring to it constantly, often daily, to help you make critical decisions about your operation… You’ll wonder how you ever lived without it!
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