Get to know your new cash flow and forecast for what’s ahead

Understand the real importance of doing cash flow forecasts during this challenging time in this useful and practical guide to managing your business during COVID-19.

7 min read

Understanding your cash flow has always been an essential part of working for yourself. This guide has tips to help you stay fully informed about your position in these challenging times, so you can take timely steps to protect your business. 

For many small businesses cash flow is something they discuss with their accountant. If you have an accountant you can easily connect them to QuickBooks so they can see all your finances in one place. If you don't yet have an accountant, but would like some professional advice, you can search our directory to find an accountant that is local to you or specialises in your industry. 

What is cash flow?

Let’s start with the basics. “Cash flow” is a term that refers to how cash moves in and out of your business and your bank account. Cash inflows are your sources of income, and cash outflows are your business expenses. And in the current climate, many businesses are finding their cash flow looks very different from usual. 

Generating a cash flow forecast

A cash flow forecast gives you a clear picture of the current state of your business. It helps you see how long you can maintain your business operations, based on the typical patterns of bringing in and spending money. You can then use this forecast as a planning tool to work out how your business would cope with a change to your income and expenses. 

Download our forecasting spreadsheet, to help you get this view of where your business stands.

Before you start, make sure all transactions are reconciled and the books are clean. To put together the forecast, you’ll need the data from your existing software or excel. Find out how to reconcile your accounts and access all the reports we reference in QuickBooks here. To begin, you’ll need to run the below reports:

  • Run a Profit and Loss report for the past 3 months to understand the average income and expenses for each month.

  • Run the Open Invoices report so you’ll be able to see anticipated sources of cash. 

  • Run the Unpaid Bills report to identify expected short-term cash outflows.

Maximising alternative income sources

After you analyse your current cash situation and create a forecast, you can focus on identifying the best ways to manage your cash flow.

Increase money in

Speeding up existing revenue streams or finding new ones can result in an injection of cash that you can use to keep business on track.

Streamline your payment process 

Make payments easier and faster for your customers. QuickBooks has several ways to help you reduce the number of outstanding invoices you have and get paid faster. 

  1. Use the Open Invoices report to see which customers owe you the most. You can prioritise how you approach them. For a detailed breakdown of how much each customer owes and the due dates, check the Customer balance detail report.

  2. To cut out any unnecessary delays, try pay enabled invoices. By adding PayPal’s ‘pay now’ button to a bill, your customers can settle up in seconds using a debit or credit card. GoCardless is an integrated app, perfect for recurring payments, such as subscriptions. 

  3. Any QuickBooks invoice can be tracked, so you know when it’s been opened and viewed. Automated reminders prompt customers before payments become overdue. 

Explore government support

The Government has launched a range of initiatives to support people who work for themselves. These include:

  • The Coronavirus Job Retention Scheme

  • The Coronavirus Business Interruption Loan Scheme 

  • The Self-employment Income Support Scheme. 

Your eligibility will depend on several factors including how you get paid, how long you’ve been in business and your location. Use filters to find the information that applies to your situation on our dedicated website for support during COVID-19. 

Other options

We’ve been blown away by the creative ideas that businesses have come up with to adjust their operating models and increase revenue. Here are some ideas that might work for you:

  • Offer discounts on your products or services.

  • Move your operations online by creating a virtual shop or classes/consultancy via Zoom/Instagram Live.

  • Personalise invoices and send them out immediately to increase the chances of prompt payment.

  • Make it easy for customers to pay by accepting credit or debit card payments online with pay now invoices. 

  • Give discounts to customers who pay within a reduced time frame.

  • Create gift cards which can be redeemed at a later date.

Keep your cash flow in good shape

QuickBooks accounting software helps maintain a positive cash flow, keeping your business in peak fitness.

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Reduce money out

The less money you spend, the longer your cash reserves will last. Several strategies can cut your expenses and have an immediate effect on your cash flow.

Reduce or defer essential payments

Work with suppliers, lenders, and HMRC to explore options for deferring payments or restructuring terms and rates. Report data from QuickBooks can help you decide who to contact first and use tips on communicating with suppliers

Reduce fixed expenses

Large monthly expenses are the easiest to identify. Reducing them could have a significant impact on the amount of cash that’s available for your business. 

Use the Transaction Detail by Account report to see your average monthly rent and Insurance costs. Run a payroll report to understand the cost of paying your team – then you can explore a variety of options for keeping costs down. 

Check current bill status

Start with the bills that are already due (or overdue). Suppliers may be flexible on timing or be able to offer payment plans. Contact them sooner rather than later and explain your situation. We’ve put together some templates for negotiating payment terms with suppliers which you may find useful. 

The Unpaid bills report will give you a snapshot of due and overdue bills. 

To see how much you owe each person or company, use the Expenses by supplier summary.

Explore options to defer loans and taxes

To identify lenders or other note-holders to contact about deferring loan payments, use the Transaction detail by account report.

HMRC are allowing the deferral of some VAT payments and delays to Self Assessment payments on account. Contact HMRC’s coronavirus helpline if you cannot pay your tax bill because of COVID-19. 

Cut back discretionary spending

Some expenses may be essential, but there are plenty that you can control. Identify items that aren’t necessary—either in the short term—to take some pressure off your cash flow. 

Marketing and advertising

Many businesses are cutting back on their marketing budget for the next few months. You may be able to do the same. To see how much you could save look at the Transaction detail by account report. 

Subscriptions and memberships 

Canceling or suspending non-essential subscriptions and memberships means immediate savings. To track fees or ongoing subscription expenses, use the dues and subscriptions Transaction detail by account report.

Staying a step ahead

Soon, we'll be launching a 30 and 90 day cash flow planner. This will allow you to forecast and plan potential scenarios that may affect your business cash flow. 

There are also great apps available to use and connect to QuickBooks.

  • Futrli uses AI to bring your numbers into one place and translate them into daily actions and real words that you can scroll through at your leisure. It allows you to rank customers and suppliers, and see which you’re most dependent on.

  • Fluidly forecasts your cash flow and surfaces pre-qualified funding options, so that you can get cash in the bank at a time of need. 

  • Fathom allows you to track business performance at a glance - you can see financial intelligence, customisable performance reporting, dashboards and consolidations.

  • Float provides a real-time, visual view of your cash flow. Your actions and insights are ordered in terms of priority, and you can set and track budgets.

At QuickBooks, we are committed to supporting you in these challenging times.  We will continue to create tools and content to help, so look out for our weekly email updates.  For more information about resources and tools, as well as the latest official guidance, visit our dedicated web page.

We hope you find this forecasting tool helpful, you can find more cash flow support on our dedicated COVID-19 support site.

COVID-19 support site