Maintaining a business in times of COVID-19 is a real tough challenge. During this time, businesses should focus their energy on understanding the risks of the business, how to manage the disruptions on supply chains, and how to protect their employees.
These are only some of the things to juggle, and they can be overwhelming. Try taking things one at a time and prioritise. The most important thing to understand by now is your business cash flow.
Why is monitoring your cash flow important?
Financial forecasts are essential to both large and small businesses for the following reasons:
Knowing your business’s financial status will make decision-making easier and quicker because you have facts and numbers as the basis.
It will help you gauge whether you’ll need financial help or support.
It will help you understand what business direction to take next.
There are no more ‘what ifs’ scenarios without basis at night.
In times of a pandemic, having a cash flow forecast is also beneficial.
The cash flow forecast is the plan that shows how much your business is expecting to receive and spend given a specific period.
Preparing a forecast will help you understand the financial impact of different scenarios, such as losing clients, delaying payments, or worst, the closing of the business.
Knowing your cash flow forecast can also help you make considerations, such as applying for loans, postponement of VAT payments, or laying off some employees.
Forecasting also helps in terms of short-term liquidity planning and long-term planning.
How to prepare your cash flow prediction
Here are the basic things to know when preparing your cash flow prediction:
Communicate with your customers and suppliers. Knowing when you’ll receive a payment or when you need to pay for supplies will help you prepare emotionally and financially.
Make sure you have access to your real-time financial information. This will help in assessing and updating your cash position and current projections.
Base all of your computations on realistic assumptions. Though predictions allow you to explore different scenarios or situations, always stick to the most realistic assumptions to get realistic estimates.
Try to see your cash flow in the quarterly period, and update it weekly or every two days. This way, you’ll see both the short and long-term business concerns, and you’ll see the situation in a bigger picture.
One study shows that businesses fail because business owners are not knowledgeable about accounting and finance, while others fail because they run out of money. Don’t allow your business to be one variable in this statistic.
Start understanding your business cashflow or let accountants do it for you. Like yours, our small business is also affected by this pandemic, but we know we can help you figure out the next step to take through the services we offer.
The Ecommerce Accountant can help you with cashflow forecasting. We are your online accountants from Australia, ready to provide cash flow maximisation strategies to help you deal with your current financial struggles. We also provide easy-to-understand reports to keep you informed. If you have any questions, don’t hesitate to contact us!