Cash flow is the lifeblood of any business, and if it stops flowing it won’t be long until you find your business six feet under. In creative businesses, there’s a lot going on, and sometimes things get missed. Even the most profitable business can run out of cash if it’s not managed correctly. Without a good plan, it can all go a bit Pete Tong – that’s where the use of effective cash flow forecasting software can help.
So if you want to find out how to keep your cash flowing more freely than bank holiday beers then keep reading.
Why forecasting cash flow is important
Great cash flow management means your business always has enough money to pay expenses, including inventory, rent, payroll, debts and more. Part of managing your cash flow correctly is being able to understand what will happen in the future. Think of it as creating a picture of tomorrow based on what we know today. That’s where cash flow forecasting software comes in.
What is cash flow forecasting software?
Cash flow forecasting software does exactly what it says on the tin: it forecasts your cash flow, giving you a clear picture of how your accounts are looking. It shows all your future payments and expenses that will be going in and out of your account.
Like a trusted weather man it can tell you if your business is headed for clear skies and sunshine or if thunderstorms lie ahead. The great thing about this is that it allows you to see exactly how your business is behaving and all the cash incomings and outgoings, alerting you to any dangers that lie ahead.
Why using cash flow forecasting software is good for business
As mentioned, a cash flow forecast is the perfect way to prepare for the future and see what’s around the corner for your business. Luckily, with just a few clicks, you can integrate your Xero accounting with comprehensive cash flow forecasting tools like Float and Fathom. These tools take into account all your business’ incoming and outgoing transactions, giving you an accurate picture of your past, present, and future accounts.
There are a whole lot of benefits to integrating cash flow forecasting software into your Xero bookkeeping. Here’s just a handful of them:
– You can see the bigger picture: Forecasting software provides a comprehensive view of your business’s cash flow, allowing you to understand the complete financial landscape of your business.
– It allows you to easily analyse your business accounts: With Xero’s intuitive interface and seamless integration of forecasting software you can effortlessly analyse your business’s financial performance, identify trends, and make data-driven decisions.
– Helps you take action before it’s too late: By forecasting your cash flow it helps you identify potential cash flow gaps or liquidity issues in advance, enabling you to take proactive measures to avoid any financial pitfalls that lie ahead.
– Consolidates all your business data: Cash flow forecasting software seamlessly integrates with your existing financial data, consolidating all your business information in one place. This streamlines the analysis process and provides a unified view of your financial health.
– Allows you to make informed decisions about your business: With accurate cash flow forecasts at your fingertips, you can make informed decisions regarding investments, expenses, and growth strategies.
– Makes management of your cash flow a lot easier: Forecasting software simplifies the management of your cash flow by automating the forecasting process and providing real-time insights. This saves you time and effort, allowing you to focus on what truly matters: running and growing your creative business.
What are other ways to help with cash flow?
Apart from using cash flow forecasting software to plan your future income and expenses, we have some handy tips to make sure your business accounts are not overspending and that your cash flow is not about to flatline.
Have cash reserves
Being a smaller scale creative business, you may not have a lot of cash reserves, and you may be thinking about growth. The best way to grow is to invest in your business, but having a solid cash reserve for unpredictable situations will help keep your business safe from major cash flow issues and reduce stress for you as the business owner. It doesn’t have to be a huge amount, but having enough in case of an emergency will make your business a lot safer.
Get invoicing
There is no shame being on top of your invoicing game and sending out your invoices promptly. If you have provided a service, you should be paid. After all, we know that a lot of businesses take ages to pay an invoice, and any late payment of invoices can quickly disrupt your cash flow.
Get your invoices sent with clear payment terms to avoid being left with no cash in the account. If needed, don’t hesitate to follow up on late payments. Automating the process with Xero can make it even easier to streamline invoicing and payment tracking.
Keep your accounting simple
Running a small business can be complicated, and you may have many different payments to handle. However, having multiple accounts for different parts of the business is a big no-no. Keeping your accounts simple is crucial for identifying problems and understanding your cash flow. Try to consolidate your business accounts as much as possible to avoid confusion and save time.
Stay on top of your expenses
When you’re trying to upscale your business, investing in your brand is essential. However, having excessive expenses can complicate matters and make it difficult to keep track of your spending. Stay vigilant and know where your hard-earned cash is going.
Regularly review your expenses and eliminate any spending your business could do without. Being able to trim the right fat from your expenses is a skill every great business owner should know, hone and utilise.
Of course, the easiest way to manage your cash flow is to leave it to the seasoned professionals. That’s where we come in. We are the Xero accounting experts that work with creative businesses to organise their accounts to ensure your business runs smoothly.
If you need some financial assistance with your creative business, get in touch here.
