3 Great Tips For Predicting Cash Flow

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One of the most essential parts of running a successful business is managing your cash flow, and knowing how much room you have to improve, or how much you need to pare down to stay in the black. Like many parts of running a business, this is a skill that deserves its own special attention and study, apart from whatever role you play in the creation of your products and the administration of your services. It can take a little practice for business owners to be able to predict their sales with a large degree of certainty, but by using the guidelines below, they can develop a general idea of what to expect and then balance their budgets effectively. These tips carry particular weight for business owners with problems like bad credit, as their financing will usually be tighter than other types of businesses.

Don’t just guess, especially when you are starting out. If you are an established business, you will have the records of your previous sales to guide you as you create an earnings forecast going forward. However, you should take into account the various environmental factors that can change sales patterns around your business. For example, you can generally count on a boost in retail sales around the holiday season, but if a competitor has just opened up across the street, you should revise your numbers to account for a possible dent in sales volume. A new business will have fewer records to go on. They can take a look at records around businesses that are comparable to theirs to help them get ideas. They should also have done market research which they should reference to try and get a handle on the possible figures they should expect.

Take account of your expenses, especially marketing ROI. If expenses are overtaking your sales, that means that something is wrong. For example, if you run a small restaurant and find that you are spending too much money on ingredients, it might be possible that you have too many options on the menu, and need to simplify. As a general rule for small business product options, quality will almost always overtake quantity. As a small business owner, you should keep your ROI under close watch in all of your marketing endeavors. If a program is not working, do’t be afraid to cut it and try something new.

Put your earnings and expenses together, then check up on them. You should have a number by the time you put together your earnings and expenses that will show adequate revenues. The next step is to see if your cash flow forecast was accurate. The more data you have to compare against your predictions, the more proficient you will become at gauging their accuracy, and putting together more coherent reports in the future.

Photo Credit to Mitchell Laurren-Ring on Flickr

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