What Are Business and Cash Forecasting Requirements?
“A business will become bankrupt if it runs out or falls short of cash and unable to get new finance. This is because cash is the most important part of all businesses, particularly startups and small companies. Consequently, cash forecasting is not negotiable if you really want to determine what will happen to your cash flow so that your business will have sufficient fund to survive.”
Cash forecasting is a precious business development tool. It will guarantee that you have the right amount of money at the right time for the smooth and effective running of your business. Forecasting your cash will help you predict cash gaps and surpluses in advance.
With the global economy turning out to be more competitive every day, it is rather challenging and difficult for businesses to handle all their financial and accounting issues on their own. As a result, they need a reliable professional accounting company that can solve these matters in a hands-on and most efficient way.
In total reverence to the convention and rules of the accounting matters in the UAE, The Bookkeeper carries out numerous accounting services channeled towards the needs of small business in Dubai.
Accounting Services Provided by The Bookkeeper in the UAE
The Bookkeeper provides the following accounting services for small businesses in the UAE.
The Bookkeeper is a professional accounting service firm located in Dubai, U.A.E. We are intended to lessen your total costs, enhance the accounting process of your organization, and bestow premium professional services.
We are always ready to help you; no matter the level of your business, or what your accounting issue is all about. All you need is discuss it with us and we guarantee you that you will get the most out of our business relationship.
We understand the issues and challenges of every entrepreneurs and business owners. That is why we are offering our expertise to be a part of your consultative team.
Entrepreneurs and business owners believe that profit is the most important as far as a new business is concerned. This is a wrong notion because profit is secondary, while cash flow matters most. This is where we can help you understand your business more.
Tips for Accurate Cash Forecasting
Without doubt, cash forecasting is one of the essential things your business should be doing. It is simply how your company can predict your annual profits compared with your year-end debt. In addition, it lets you get a clear glance of where you are making the most and discover where your business is dripping money.
With cash flow forecasting, you can set your financial objectives for the next year. But how do you set your cash flow forecasting? Continue reading to find answer to this question.
1. How Much Money Will You Be Introducing?
Estimating how many sales you think you will bring weekly or monthly is the first step in any cash flow forecast. Referencing the history of your previous sales is a great way to get these estimates. In other words, check the previous years and try to get a good idea.
Apparently your sales won’t be consistent all the time. Therefore, consider the patterns that are the same each year, and those factors that could change each year, like promotions or trade shows, when you are making your projections.
You also need to think about your future plans deeply. Any new products you introduce into the business or marketing efforts you make should let you increase your sales forecasts.
2. Consider the Terms of Payment
As a seasoned entrepreneur or business owner, you must understand that you don’t always get the money you earn instantly. You should be waiting for a period of 30+ days for many of your sales to receive the cash. Hence, it is vital to estimate when you expect payment from your sales whenever you are preparing cash forecast.
3. How Will You Spend?
It is absolutely vital for you to estimate how much your business spends, when preparing your cash forecast. These costs have to be both fixed and variable, but you should do the best you can. Your fixed costs include rent and how much you are paying employees.
Variable costs on the other hand are related to the sale of the product or service you offer. Therefore, to help you estimate a number of these variable costs refer back to your forecasted sales. Put in your best possible to estimate the bills you are expecting and when they will need to be paid.
Make sure you go through your previous year expenses, and also make sure there are no annual fees you forget to include since they only come once a year. Once estimated, make sure you incorporate these costs into your cash flow forecast.
Business and Cash forecasting Requirements
With cash flow being very important, failure to forecast precisely can put your business in danger, making it susceptible to future cash difficulty. But in case you are not yet convinced that cash forecasting is necessary for your business or if you are not certain of what it really involves, here are the business and Cash forecasting requirements.
1. Know How the Amount of Cash You WIll Have in the Bank
Cash forecast takes into consideration all your future payments and transactions, figuring out when and how much money will sustain your business up to a period of 3 years in the future. Cash forecast reveals when invoices will really be paid, instead of showing when invoices of customers are generated. This will make sure your future cash predictions are very solid.
2. Make Sure You Can Pay Your Suppliers on Time
Paying your suppliers regularly and on time can make or mar your reputation. Inability to pay or paying your customers late for the goods supplied could prevent your suppliers from wanting to trade with you in the future.
However, you can easily confirm that you will be able to pay your customers by due date or maybe you need to get in touch with them as soon as possible if you have cash flow forecast that predicts how much money will be on hand at a particular time.
3. Look Forward to Cash Surpluses and Shortage
Your business will be able to foresee and even plan ahead for periods when there will be no cash and you know how much cash you will have in the future.
With cash forecasting you will be able to discover at a glance whether you need to cut down on operating costs to complement the difference or probably you need to wait to employ additional worker.
In addition, you will be able to forecast when your business will have cash surpluses, assisting you to make a decision about how you will reinvest this in your business.
