Forecasting your cash flow is one of the most valuable things a business owner can do to ensure the stability of their operation. But if you haven't been forecasting, you may want to consider making changes in order to start doing so in the future. What are some of these important moves? Here are a few to get you started.
1. Use Accounting Software
One of the best ways to make forecasting easy and successful is to use accounting software. Modern accounting and bookkeeping programs do much of the work for you. They allow you to enter information long before it's needed, and to make changes for the most accuracy. If you haven't been using accounting software, talk with your accountant about how to switch.
2. Enter Invoices Early
Accounts payable and accounts receivable — what you owe and what others owe you — are two of the biggest key components of good forecasting. They represent the bulk of what cash you have to pay and when you need to pay, along with when you can expect to get money in. Therefore, the earlier you enter these items into your ledgers, the longer out you will be able to forecast.
The ability to enter invoices into the books early, and generate reports with them, is one of the primary advantages of switching to accounting software. But you may require some training to use this software to the fullest.
3. Improve Consistency
How does consistency help you forecast? When a transaction has variability about what account it will be in, or when it will be completed, you won't know when and how to include it in forecasting. If you request a down payment on some orders but not other similar orders, you can't know when to expect cash for all jobs. Additionally, posting some invoices early, but not others, makes future expenses inaccurate.
Consistency can be difficult for many small businesses to achieve. You want to use the right methods consistently, rather than adopting incorrect methods (particularly when entering transactions on the books). To help with this, consult with an accountant to learn what are the right — and best — ways to do things and then adopt these instructions.
Because forecasting is the end result of a long preparation process, working with an experienced business accountant can be one of the best aids. Learn more about business accounting from a local accountant, and how this can improve your business.Share