As a business, managing finances can be a bit tricky. You may find yourself in situations where your company ends the fiscal year with enormous profits, however, it still runs out of money. Such a scenario occurs when there's more money coming out than coming in for the business. That is where proper cash-flow comes into the picture. As a company, the goal is to strike a balance between the incoming and outgoing cash-flow. To do this, accurate cash-flow forecasting becomes imperative, as it allows you to maintain the financial health of your business.
That said, here's why you should conduct cash-flow forecasting for your business. Read on to see why it's best to hire accountant services online for proper forecasting.
1. To track your financial history
Part of the cash-flow forecast process is to track the history of your sales and expenditures. By taking a look at your financial history, you'll be able to know what to expect as far as finances are concerned. For instance, you'll know when the sales peak and when they're dormant. You'll also determine the regular expenses that your business may need to prepare. By studying the sales trend based on your financial history, you can better forecast and come in financially prepared.
2. To set a year-long projection
Cash-flow forecasting entails setting a budget in place for the entire fiscal year. This projected budget is broken down into a month-to-month cash-flow projection. This forecasting process starts with your beginning month cash balance, which is then subtracted with your planned expenditures and then added with what you expect to receive in that particular month. You'll do the same for all the months in the entire fiscal year. With this year-long projection, you come in prepared for what lies ahead.
3. To secure loans and lines of credit
A cash-flow forecast allows you to see any financial problems that may arise. As you anticipate the lack of financial resources way ahead of time, you can secure a government-backed loan or a line of credit. That way, you can keep your business financially secured so that it’s up and running optimally the whole year. Apart from this, such a forecast will also show you when your income will be enough to cover the debts and how your business will get back to its usual grind.
4. To grow your business
The primary goal of cash-flow forecasting isn't only to maintain the financial health of your business. In general, it is meant to help you grow your business. Through monitoring your financial history, you'll be able to review financial trends and make sound business decisions. Through a year-long projection, you'll be able to cost-cut your expenses and find a way to generate more income. Your ultimate goal is to grow and expand your business in the long run.
There's no denying that cash-flow forecasting should be performed at the onset of the fiscal year. As outlined above, this can help you track your financial history, set a year-long projection, secure loans and lines of credit, and, ultimately, grow your business.
With that said, it's best to hire a professional e-commerce accountant who can help you manage all aspects of your business financials, especially when it comes to conducting cash-flow forecasting.
We provide e-commerce accounting services to help online entrepreneurs reduce tax and increase profit. If you're looking for a professional e-commerce accountant in Australia for your cash flow forecasting, get in touch with us today to see how we can help!