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It was there last week! How come the cash flow is negative rather than positive? There have been
many times we have heard business owners say this (I have even heard myself say this). What
can make your cash flow negative rather than positive? Sounds so simple why even ask the
question. More cash has gone out than been received - the simple and obvious answer. So why
the surprise?
Many business owners run their cash flow forecast and analysis in their head with mental check
points as to where they expect to be at any point of time.
Some business owners prepare a simple cash forecast on a spreadsheet or get someone to
prepare the spreadsheet for them.
In both cases, we can get caught by surprise as a forecast is based on assumptions or best guess
based on previous data or behavior. Where has the cash gone!
We expected a certain amount of cash to be there so what went wrong?
Here is a quick checklist for your business to find out where the cash has gone.
1. Cash In - Who has not paid you on time? Have all receipts been entered correctly?
2. Cash Out - Who have you paid that you didn't plan to pay? Have all payments made been
entered correctly?
3. Cash starting balance - Did you start with the correct cash starting balance? Check your bank
balances.
4. Identify what assumptions/best guesses were wrong and adjust your forecast for the next
period.
When we prepare a cashflow forecast, we have to first complete an analysisof where cash has
gone in the past, so we better understand how the cash flows in our business. By looking at how
our cash has flowed in and out we can make some assumptions and fine tune them to prepare the
cashflow forecast.
Having completed the cashflow forecast then we need to monitor it and take proactive steps,
especially if there are some critical cash flows in or out.
For instance the majority of the cash flow in maybe expected from 2 large customers. Rather than
wait for them to pay, call them and ask if they will be paying this week and/or send them an email
with their statement and reminder of what invoices are due for payment and by when.
With cash going out, highlight those payments you may want to delay and instruct your accounts
payable person to check with you first.
Having set a cashflow forecast whether in your head or preferably on paper, highlight the critical
cash flows in and out of your business.
Make sure that either you or you and nominated people are taking proactive steps and monitoring
the situation.
Some surprises can be pleasant, however most of the time a surprise may upset your cash flow
plan.
Learn more about increasing your business cash flow
About this Author
Bronwyn Buck assists business owners to increase their cashflow and profits a step at a time.
Whether the business is planning to grow, or recover from a set back or just stay as it is, simple
action steps are created with the business owner to suit the business needs. Need to get More
CashFlow in your Business? FREE "7 Step Cash Flow Crisis Rescue Guide" reveals the steps to
take for getting more Positive Cash Flow into your business. Not in a crisis, that's good news. The
7 Steps can still be used and applies to any size or type of business. Click Here =>
http://morecashflowoptions.com
Article Source:
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