Managing a cash flow plan is something that everyone who expects to run a successful business should understand. The cash flow plan is aimed at the near future and is particularly important for businesses with cash flow trouble; when done correctly, this exercise allows business that are short on cash to better manage their finances. There are many factors that go into creating a cash flow plan – monthly sales, receivables, business growth, forecasting – and understanding how to properly plan spending and sales can be one of the ways a business can set itself apart from its competitors.

Monthly sales

A business owner will never be able to project sales down to the dollar; however, looking at past sales numbers and considering expectations for the upcoming year will help when projecting potential sales. When developing financial forecasting models, it is always smart to err on the side of caution by creating a cash flow plan based on a worst-case scenario. In order to grow based on their financial projections, businesses need to be conscious of how much capital they have readily available and be willing to adjust their budgets and plans when necessary.

Expect the unexpected   

When looking at a business' cash flow, there any many things that can occur that simply cannot be planned for. Having funds set aside for these types of scenarios is a must, because a business should always to be ready to step up when opportunities for growth present themselves. If a business doesn't encounter any surprises during the lifespan of its cash flow plan, it can use the extra resources its put aside to fund other growth opportunities.

Group together fixed costs

Every business has set costs that are consistent each month: rent, payroll, utilities, phone services to name a few. Consolidating these expenses into one group in a cash flow plan can give a business owner a better idea of how much money he or she will be able to spend. Setting these costs into one group and making sure they are accounted for is an important part of managing a budget.

Keep all purchases in mind

Many businesses accept multiple forms of payment, and often these receivables are not readily available for up to six months. When creating a cash flow plan, it is important to keep these funds in mind, and make clear notes as to when they will be able to be used. Businesses can invest these resources in equipment, employees and marketing, all of which can help promote growth, or save the extra funds for future emergencies.

 

var addthis_config = {services_compact: ‘facebook,twitter,linkedin’}