1. Create a cash-flow forecast
Forecasting your business cash flow helps offset uncertainty by predicting peaks and troughs in your cash balance. A forecast highlights the cycles in your business and predicts your cash flow on a monthly and yearly basis.
First, draw up a list of the payments you need to make over the next year – this may include stock and equipment, wages, rent, loan repayments and taxes. Next, list what money will be coming into the business – this can be anything from customer payments, interest on savings and investments to shareholder investments and tax returns. Finally, subtract your outgoings from your ingoings to see how much money you will have at any given time. For example, your biggest sales month may be in December, but this could be affected by the cost of hiring additional staff at that time.
Having this information on hand means you can look at spreading out big purchases and investments – such as staff hires, marketing campaigns or bank loans – so your cash flow is not affected.