It is essential to know how to make cash flow forecasts in order to be able to plan financial actions within the company. Knowing how our cash will behave over time is essential in order to make the best decisions within the company.

A company’s cash flow refers to the amount of cash available. By monitoring this cash flow we can observe the cash flow. It analyzes the company’s inflows and outflows and determines its liquidity.

What is the purpose of cash flow forecasts?

From what happened in the company’s past, can predict what may happen in the future. The know how much liquid capital your company has is currently fine, but knowing how much you will have throughout the year is a value that helps you make decisions. An entrepreneur cannot manage with uncertainty about what will happen financially to his company. If this information from the past is well organized, the prediction will be even better.
Knowing what has happened in the past, how much liquidity you have in the present and how future actions will impact you can make decisions about the urgency of a debt collection or payment.

Tips on how to make cash flow forecasts:

  • Collect all data on receipts and payments, since we are interested in knowing the cash flow and available liquidity, so you should only collect cash inflows and outflows. When compiling this information, you could use billing software that will be of great help to you.
  • You should start forecasting, separating the recurrent from the extraordinary; do the same with the payments. It is important to do so in order to avoid distortions in the forecast that could lead to incorrect decisions and, perhaps, future cash flow problems.
  • Determine the best terms for your company although it is usual to make a cash flow forecast on a monthly basis, each company will need different terms.
  • When you do this, ask yourself the following questions: Do you do better on a weekly, biweekly or monthly basis? Do you want to have an overall picture of your box? And, in either case, it simplifies. Making too many cash forecasts will add complexity to management and make decision making more difficult.
  • Use an appropriate cash flow forecasting tool, such as Orama, which allows you to make adjustments quickly and effectively.
  • Once you have the cash flow forecast, you must adjust it with the final data. These estimates are therefore subject to deviations (especially in the unforeseen receipts and payments). Use these mismatches to make a better estimate in subsequent months.

With Orama you will be able to make 12-month forecasts of your cash flow. This will allow you to make the best decisions in the present and future to ensure the success of your company.

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