Here are 5 common mistakes that are easy to make when forecasting Cash Flow for your Business. (only takes 2 minutes to read).
1. Not looking at the complete picture. Looking at cash flow alone is like having your eye on one important score board and not looking at other scoreboards which are just as important. You can be making profit whilst not having cash flow and making losses whilst having cash flow – so you can’t simply look at one without the other.
2. Not understanding the difference between Cash and Profit or thinking that they positively correlated.
3. Not factoring in GST and wages payments correctly in timing
4. Not factoring in the number of weeks or fortnights in a year as to when you make payments such as wages – ie every now and then you will have 5 weeks or three fortnights in a month.
5. Remembering that when you look at the balance of a monthly cash flow within that month there is ups and downs – so allow leeway and manage within the month as well – don’t assume that the figure on the cash flow projection for the end of the month is actually the lowest it could be for the month.
Recent innovations in this area:
Cashmax forecaster – an online tool that allows you to do a projection of cash, profit and balance sheet easily and quickly breaking all the factors down into the key points of view that you can then easily and readily manage and monitor.
David Henderson. CA.