Cash flow is one of the most important metrics that help you keep your business afloat during unexpected times and take it ahead. It tells you the money is coming in and going out of your business during a period and how efficiently you’re operating.
Today, there are several innovative and futuristic cash flow forecasting and management software that you can use for cash flow projection in your small business. How do these tools work? What are their benefits? What you can learn or take away? Keep reading while we’re sharing top reasons to use cash flow forecasting software in your small business.
More Power, Less Time Consuming
Cash flow forecasting gives you back and could save a lot of your time and energy. These innovative tools take away all the guesswork and help you make well-informed decisions by combining smarter decisions with data analysis.
There is no need to spend a lot of time creating endless spreadsheets or consulting your accounts to predict the financial future of your small business. Visual dashboards with clear cash-on-hand indicators, scenario planning, predictive future receipts and payments, and other features help you better know your future cash flow.
Identify Strengths and Weaknesses
Spreadsheets don’t tell the full story of your small business - especially if you’re a visual learner. Moreover, only a few spreadsheets can tell the true story of your business’ efficiencies. Undoubtedly, you can better identify your business's strengths and weaknesses by exploring charts and graphs instead of seeing them in numbers and percentages.
Regular forecasting of your small business cash flow can help you see:
- Problems in your accounts receivable and payable processes, such as consistently late payments or long invoice cycles.
- How to plan for emergencies, seasonal or unexpected expenses
- The past performance of your business cash flow
- Best sources of recurring revenue
- What is your business's total income and expense over a while
Determine Your Financing Needs
When you have a strong cash flow, you are in a better position to determine your business financing needs. Your business cash flow forecast helps you better plan for when you’ll need loans to successfully run and grow your small business or simply upgrade or maintain your current status quo.
Obviously, when you know how much money is going in and out of your business and when the money is being paid to you, you can better determine when you’ll need access to more capital or if you’re able to pay the loan amount.
A positive cash flow helps you easily qualify for most of the traditional and non-traditional financing options. In fact, today most lenders will consider your business cash flow forecast when reviewing your loan application. And once you secure a small business loan, forecasting will help you stay on track with your repayments.
Build Better Financial Health
Regularly forecasting your business’ cash flow using advanced cash flow forecasting software helps you build better financial health. Intuitive dashboards, graphs, and customizable scenario planning give you robust analytics in easy formats, making it easy to track your business's overall financial health.
Cash flow forecasting helps you view, plan and solve cash flow gaps in real-time. It also helps you seamlessly estimate the money you expect to flow in and out and see what your future cash position would like. You can make informed financial decisions and plan for potential problems before they cause a cash crisis, especially if you’re making a cash flow forecast regularly.
Make Informed Financial Decisions
A cash flow forecast helps you predict your business’ future income and expenses, along with the projected increase in sales, to determine if you can take out a new loan, hire new talents or invest in your business growth.
When you clearly see what your future cash position will look like, you can make better financial decisions and take your business ahead.
So cash flow forecasting has numerous benefits and it’s always a great idea to use cash flow forecasting software to better predict your business cash flow and make smarter financial decisions.
The options for preparing Statement of Cash Flows are Direct and Indirect.
For the indirect method, preparer should note that there are a number of cells that have been programmed to be autosubtracted from the subtotals/total in this statement.
After filling in the statement, preparers may hide unused rows by using the “Untagged rows” function at the tool box for ease of view.
Below are a step-by-step guide and an illustration of how it should be filled.
M1 — After filling in all the adjustments to the profit (loss) before tax, ensure to check that the “Operating surplus (deficit) before working capital changes” is equal to the figure in the FS.
M2 — After filling in all the cash generated from (used in) operating activities, ensure to check that the “Net cash flows from (used in) operating activities” is equal to the figure in the FS.
