The value of cash flow forecasting during a crisis

May 11, 2020

A business cash flow forecast is not a crystal ball. But it will give you vital business intelligence to help you scenario-plan, search for cost-savings and look for strategies that will preserve your cash flow position. During the ongoing COVID-19 crisis, many sectors are seeing income either disappear completely or drop to dangerous levels. To be able to navigate the future path of your cash flow, you need to start forecasting – so you can map out your financial position over the coming months and can take the appropriate action to safeguard your cash position.


Forecasting your future cash pipeline

Projecting your cash flow pipeline forwards during a crisis is vital. Having access to detailed forecasts helps you to scenario-plan, search for cost-savings and look for strategies that will preserve your cash flow position. Remaining in 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 can resolve any issues.


How to get more from your forecasting

 

  • Run regular forecasts – the financial landscape is changing on a daily basis at present. Variables and external drivers are changing each day, so it’s vital that you run frequent forecasts and react swiftly to any projected cash issues as they become apparent.
  • Explore the right revenue streams – most sectors will have seen their face-to-face sales drop to absolute zero since lockdown 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 or have started doing online ordering and deliveries. The idea is to find ways to increase the money that’s coming in the door and balance out your unavoidable expenses.
  • Get proactive with cost-cutting – if you can reduce cash outflows to a minimum, that will have a real impact on the health of your future cash flow. Pare back your operations and aim to reduce things like unnecessary software subscriptions, or over-ordering of basic supplies. 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 look at ways to reduce the costs of staffing and resourcing. Reducing working hours or redeploying staff in different roles are all 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 a giant cash flow hole coming up, you’re going to need additional funding to get through this crisis. We can assist your business to investigate funding opportunities from Government subsidies, grants, banks and other loan providers.
  • Use the best cash flow forecasting software – we use Spotlight Reporting to produce visual representations of our clients' business cash flow situation now and in the future. Spotlight Reporting integrates directly with your Xero account, giving a drilled-down view of how your cash inflows and outflows will pan out over the coming months – information that will inform and justify the decisions you make during these extremely challenging times.

 

Talk to us about setting up cash flow forecasting

Forecasting is an important step to give you the business intelligence to support your decision making. We are able to offer either one-off, or ongoing cash flow forecasts, customised to your business' needs.


Get in touch and get control over your cash flow.

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