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Now What

Cash Forecasts > Developing Your Forecast
Now you need to assemble and use the information that you previously gathered and developed to prepare your formal Cash Forecast.

Hopefully, you have some software that you can use to make the job and calculations a lot less tedious and time consuming. It just so happens that you do ! My free template included in this tutorial should be a tool that hopefully makes the task a little easier.
Yes, you can still do it the manual ole fashioned way, but while I'm out enjoying a round of golf you'll still be sitting in your office pulling your hair out.
Your Final Step (Task)
Are you ready ? All the analysis and information gathering we discussed and illustrated comes together in this completed and formal document.

Sample of a
Formal Filled In Cash Forecast For 12 Months

What information is summarized and where does it come from ? This will be discussed and illustrated later when we actually prepare a Cash Forecast for Ma & Pop's Antique Shop.
What Should You Watch Out For ?
  • Overstating Sales Forecast ( Too optimistic)
  • Understating costs and expenses
  • Ignoring past experience and trends
  • Assuming your friendly banker will always bail you out

How Can I Improve the Estimates that I Use for my Cash Projection ?
Use your Cash Flow Projection also as a Budget and Record and Compare your Actual Receipts and Payments with your Estimated Receipts and Payments by period. In other words, compare your actual results with your forecasted amounts. This comparison helps the small business owner identify areas that may require investigation or improvements or changes to the method(s) used for estimating amounts contained in the Cash Forecast.

Your Plan Requires Actions To Make It Work.
Just by putting your plans on paper does not make anything happen. In business as in life, to get anything done and accomplished requires Action. Use your Cash Forecast as a tool and take any actions necessary to ensure that your business is not one of those that fails because they couldn't pay their bills.
What are some possible actions you might have to take ?
  • Change Customer Credit Terms.
  • Monitor your customer collections to have them paid on time - nicely "tweak" them if their late.
    Shucks, use the sledgehammer if you have to.
  • Negotiate better supplier payment terms.
  • Speed Up Cash Collections
    • Lock Box
    • Faster Billing

Remember these things don't just happen by themselves, you have to make them happen.

Once My Forecast Is Prepared Am I Thru ?
Initially preparing the forecast, although important, is just the first step. You should continually monitor and update your estimates as conditions warrant and better information becomes available. In addition, you should also compare your actual amounts with you're planned amounts. You should probably spend at least a couple of hours a week "tweaking" your Cash Forecast.
What Did We Accomplish ?
I don't know if you realize it or not, but we covered quite a bit in this lesson.
What did we learn and accomplish ?

  • Cash is a business's most precious asset and managing Cash Flow is one of the most important tasks every top manager and business owner should understand.
  • What a Cash Forecast is.
  • What's involved in preparing a Cash Forecast.
  • Why you need a Cash Forecast.
  • The benefits of preparing and using a Cash Forecast.
  • The information needed to prepare a Cash Forecast and where to get it.
A Few Last Words Of Advice
When IBM introduced their Personal Computer (PC) ,now many years ago, I immediately jumped on the band wagon and bought one. Of course I also needed to search around and find some good business software (at the time there wasn't a whole lot available) to use with my new computer. Without the software, it would have just been an expensive paper weight.

I did this because I didn't want to become an obsolete accountant. Using the software and computer I could perform many of the tasks for my clients such as bookkeeping and projections in a fraction of the time that I could do these same tasks manually.

Hopefully you small business owners have also jumped on the computer band wagon. With the low price and availability of computers and good software, I'm hard pressed to think of a valid reason not to.

With a personal computer, your business can have the added advantage of quick cash-flow projections as well as many other useful tools such as bookkeeping, document processing, and payroll applications.

While a computer and accounting software is not an absolute necessity for a small business, it is a business tool which in my opinion you can't do without.

Your Final Task-Optional
Preparing Ma & Pa's Cash Forecast

Even if you don't want to actually do the exercise, I do recommend that you get your feet wet and see what's actually involved in preparing Ma and Pa's Cash Forecast.

What's next ?

It Depends.

If you want to help Ma & Pa prepare a Cash Projection - Click On Ma & Pa's Cash Projection Button

If Not - Click On the Final Review Button

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