The benefits of cashflow forecasting during a crisis

It’s helpful to project your cashflow pipeline forwards at any time, but during a crisis it’s absolutely crucial. To be able to navigate the future path of your cashflow, you need to start forecasting, so that you can map out your financial position over the coming months and take appropriate action to safeguard your cash position.

In reality, retaining control of the cash coming into – and going out of – the business is the real focus, so you can accurately predict your financial position and resolve any issues. There are some simple ways to ensure that you get the most out of your forecasting:

• Run regular forecasts: the financial landscape is currently changing on a daily basis, and a cashflow forecast is not a document that remains static. Variables and external drivers are literally changing each day, so it’s vital that you run frequent forecasts and react swiftly to any projected cash issues as they become apparent.
• Use the latest cashflow forecasting apps: cashflow forecasting apps such as Fluidly, Float, or Futrli, will integrate with your Xero accounts, giving a drilled-down view of how your cash will flow in and out of the business over the coming months. This information will then inform and justify the decisions you make during these extremely challenging times.
• Explore the right revenue streams: most sectors will have seen their face-to-face sales drop considerably since quarantine restrictions came into place. To overcome this, there’s a real imperative to explore revenue streams and new opportunities for income. An example of this is coffee shops that now sell roasted beans online (depending on lockdown restrictions). The idea is to find ways to increase the money that’s coming in and balance out your unavoidable expenses.
• Get proactive with cost-cutting: reducing cash outflows to a minimum will have a real impact on the health of your future cashflow. Pare back your operations and aim to reduce expenditure on unnecessary software subscriptions. Avoid over-ordering basic supplies, and negotiating cheaper rates with suppliers, if possible, will also help.
• Review your staffing needs: now’s not the time to make anyone redundant, but you can still look at ways to cut the costs of staffing and resourcing. Reducing working hours or redeploying staff in different roles are options that reduce payroll costs, while also looking after your staff’s welfare.
• Run a variety of scenarios: changing the financial drivers in your forecast model allows you to scenario-plan different strategies and options. Many of these will be in a long-term plan when restrictions ease. Scenario-planning lets you answer questions and will give you some hard evidence on which to base your decision-making and strategic outlook over the coming months.
• Look at various ways to access funding: if forecasts show that a giant cashflow hole is looming, you’re going to need additional funding to get through this crisis. We can help you investigate funding opportunities from grants, banks, loan providers, alternative lenders and crowd-funders.

For Ben Case, owner of decimal+ accountants in Newmarket, cashflow forecasting is a prudent course of action at any time, but even more so when times are tough. ‘A cashflow forecast will give you vital business intelligence to help you plan for a range of different scenarios, search for ways to cut costs and look for strategies that will preserve your overall cashflow position,’ says Ben. ‘It can be a little daunting to create a cashflow forecast, and it’s often the sort of thing that busines owners leave for another day. But it can also be your downfall if you’re unaware of a potential cash shortfall that’s round the corner, so we encourage all our clients to prioritise it. And if they need any assistance, we’re always here to help.’

Decimal+ are accountants in Newmarket and Cambridge, and we’re able to help our clients manage and forecast their cashflow. Why not contact us for an initial discussion?