A good cash flow forecast might be the most important single piece of a business plan. All the strategy, tactics, and ongoing business activities mean nothing if there isn’t enough money to pay the bills says Eminent Business Astrologer Hirav Shah who is also an Astro Strategist.
That’s what a cash flow forecast is about—predicting your money needs in advance.
By cash, we mean the money you can spend. Cash includes your checking account, savings, and liquid securities like money market funds. It is not just coins and bills.
Hirav Shah says, “Starting a new business or kicking off a new high-growth project is an exhilarating experience. However, such a project has its share of challenges. Note that a third of all businesses fail during the first two years of life: half will not even celebrate their sixth birthday. Why is this so? There are a variety of reasons why so many businesses and projects fail. The main one is without a doubt the absence of a good business concept. However, many companies with good ideas have to shut down. Too often, the reason is poor cash flow management.”
“The statement of cash flows gives a good idea of the current financial health of a business. Having an idea of your company’s future financial projection would, however, be even more advantageous for earning more money easily. You do not need to be sighted to make this kind of projection into the future.”
Hirav Shah explains that every business faces risks at some point. A cash flow forecast will allow you to anticipate the amount of money you are likely to have in your bank account. Or how much money you probably won’t have. This is a “forecast,” just like the daily weather forecast, there is no guarantee that everything will go as planned … Hence the usefulness of working on the basis of different scenarios that allow you to ” anticipate potential problems before they cause a cash crisis
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What is a Cash Flow Projection?
Cash flows are all the money that comes in and goes out of business. Healthy funding streams can help lead an online business to success. Poor or negative financial projections can, however, be fatal for the future of your project.
The projection of cash flows aims to anticipate the state of the money available in business over the times to come. This includes all income and expenses made by its owner. Most companies’ funding flow projections are defined over a 12-month period.
The projection can, however, also be weekly, monthly, or semi-annual. Projecting net cash flow is also not an approach suitable for all businesses. This kind of analysis is long and expensive to implement.
The forecast is not perfect. The main thing is that the projections give a clearer picture of the management of the company. They show you where you need to make improvements to get rich and cut costs.
Calculation of Flows for a Projection
The calculation of free cash flow for a business calls for the collection of its historical accounting data. These are detailed reports on the income and expenses of the company concerned.
Such documentation is collected by an accountant or transcribed in records or accounting software. Further detail may be required based on the screening schedule.
There are essentially five steps involved in calculating cash flow projections.
The first is the search for the company’s liquidity at the start of the projection period. To do this, simply subtract the expenses of the previous period from the income of the same period.
The second step is to estimate the cash inflows into the business for the next period. Incoming money includes items like income, credit sales, loans, etc. You can predict future cash flow by examining trends from previous periods.
Be sure to consider any changes or factors that differ from previous periods. This includes, in particular, the new products that the company will offer.
The third step is to assess the expenses for the next period.Think of all the expenses you will pay for the coming period. Consider things like raw materials, rent, utilities, and insurance.
The fourth step is where you will subtract the estimated income from the related expenses.
The last step is to add cash flow to the opening balance. This will give you a closing balance to carry forward as a starting balance for the next period. You can realize the projected cash flow for the next period by following these same steps.
Hirav Shah finishes the discussion by saying, “Remember: You should be able to project cash flow using competently educated guesses based on an understanding of the flow in your business of sales, sales on credit, receivables, inventory, and payables.
These are useful projections. But, real management is minding the projections every month with plan versus actual analysis so you can catch changes in time to manage them.
A good cash flow forecast will show you exactly when cash might run low in the future so you can prepare. It’s always better to plan ahead so you can set up a line of credit or secure additional investment so your business can survive periods of negative cash flow.”
Final Word
For the most successful people in the world, 2021 already started… Has it for YOU?
Who doesn’t want to experience success in business,?
But are you truly doing the right things to get there?
Can you honestly say that you are taking ACTION on your goals?
If you hesitated AT ALL answering any of those questions, you need to shift your focus to doing what’s necessary to get you the success you desire…
Without an actionable strategy, NOTHING is possible.
With Astro Strategy, EVERYTHING is possible.
So plant the seeds now for your future, and focus on investing energy in the habits that will create the results you really want.
NOW is the time to do the things that you have been wanting to do. Don’t procrastinate and rob yourself of a more compelling future…
What ONE goal will you focus on for a head start in 2021?
Any confusion or difficult YES/NO Business decision requires an expert opinion.
Just make sure your business strategy in terms of Brand, Sales, Marketing, Advertising, Mergers, Diversification, etc…is still on track to reach your goals. Business Astrologer Hirav Shah’s answers have proven to be game-changers.
It’s time to fire up your future!!
