A cashflow forecast is one of the most helpful tools for a business owner to know about. A cashflow forecast sets out when your business will receive income from sales and when bills need to be paid. It can be prepared on a weekly or monthly basis.
There are some businesses who are really struggling financially at the moment.
For those business owners, the best advice we can give at the moment is this: you need to get on top of your numbers.
If this is something you’re not comfortable with, follow these steps to get started.
Put together a cashflow forecast for the next 4 weeks.
That means, estimating how much cash you think you’ll be getting in each week, for the next 4 weeks.
Next, estimate how much you think you’ll be paying out each week for the next 4 weeks.
Do this for each week, not just the total for the 4 weeks all thrown in together.
That means, Week 1: Money In, less Money Out, how much is left.
Then, Week 2: Money In, less Money Out, how much is left, etc.
Next, see what it looks like (i.e how bad is it?)
For most people, their biggest concern is getting enough cash in to cover the bills.
So, make a list of all the bills you owe, including the Tax Office and Super.
List them on one page. If using software, make sure it’s up to date then review the Total Payables report.
Then, contact all of your suppliers, including your banks and landlord.
Communicate with them. Let them know what’s going on. If things are bad, tell them. Or if you can see it turning around, let them know that too.
Think carefully and set a plan.
Remember, communication is key in these tough times. The temptation is to bury your head in the sand and pretend things aren’t that bad.
This is not a good strategy.
Be brave and be bold.
Be strong and look your business straight in the eyes. See it for what it is.
Then think carefully about your next step. Set that plan and put it into action.
Let me know if you need a hand, or want someone to hold you accountable to the plan you have set.
Peter
How to forecast Sales Revenue for August.
Forecasting sales for the month ahead is always tricky, but even more so in these COVID times.
Here’s an approach which may assist:
Look at Sales Revenue for July
Compare to May and June
Recall the events of July, anything significant which might be ‘one off’? e.g Lockdown?
Consider any upcoming events which might impact August sales
Will they have a positive or negative impact on Sales?
Review the marketing activity planned for August
What impact do you think they will have?
What lessons have been learned from the year so far?
Factor these into your forecast.
An excellent way to ‘stress test’ this forecast is to compare it against your Breakeven Point for August
To do this, follow these steps:
List all of the expenses coming up for August
Many of these will be known (rent, leases)
Others will need to be estimated
Include wages for yourself
Once you have a full list, gross this figure up by your Gross Margin (%).
This is your Sales Breakeven Point
This is your Sales Target which you MUST hit to cover your expenses
Anything less than this and you are losing money
Compare this against the forecast above and adjust if necessary
Both of these approaches will assist in your forecasting.
Let me know if you need a hand
Peter