The New Normal, part 3: Getting in the (Cash)Flow

In my New Normal series, we’ve been focusing on the ways businesses have adapted to the changed landscape and making recommendations to help push small businesses even further ahead. (Missing something? Check out part 1 and part 2 here).  

The accounting world isn’t known for catchy slogans, but does the phrase “Cash is King” ring a bell? Unless you’re one of the lucky few with unlimited cash resources to tap into, making sure that there’s enough cash on hand is every business’s lifeline. That said, if you’re hanging onto your bank balance but not taking the time to make cash flow projections it’s a bit like floating on a life raft without knowing where to find the closest shore.  

A cash flow projection can give you the insight you need to make better decisions. When done correctly, a cash flow projection can help you see shortfalls months in advance, giving you the time to make critical adjustments. It can also be the bearer of good news and let you know when to expect to have more breathing room.

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There are a few key ways that cash flow projections can go wrong. If you’ve tried creating them before without success, it could be due to one of these common cash flow pitfalls:

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TOP 3 CASH FLOW PROJECTION PITFALLS

1.     Not enough information. The better the information that goes in, the better the information that comes out. I’ve seen business owners swear by the income and expenses they project, only to realize that they’ve missed large expenses (especially distributions!) when trying to figure out what went wrong.

2.     Rose-colored glasses. I love optimism, but if you’re only using the best case scenario to put together your cash flow projection, you could be setting yourself up for failure. Invoices don’t always get paid on time and that pop up event you’re planning might end up being better for brand exposure than for sales.

3.     Not taking the time to evaluate. A cash flow projection isn’t one-and-done. If you didn’t get it quite right, are you taking the time to figure out why? Looking back on what actually happened versus what you thought would happen is the key to improving your projections going forward.

Is creating a cash flow projection something that you’ve been wanting to do? You don’t have to go it alone---Keepbooking is happy to help you create and fine tune your cash flow projection so that you can make the moves your business needs to weather whatever comes next.