How to project business cash flow

We discuss the factors that impact business cash flow, how to plan ahead, and software that can improve performance.

4 August 2021

How to project business cash flow

Around 29% of startup businesses fail due to cash flow problems. Cash is the lifeblood of your business. If your company doesn't generate enough cash from its activities, it won't cover its expenses and have enough left to repay investors or grow the business. Cash flow is all about the fundamental health of the business ; Monitoring it and knowing how to run business cash flow projections will help your business avoid running into serious money troubles in the future.

Why is cash important to a business?

Without cash, your business will stop working. You need to work out when you'll have money coming in, and how to get more of it coming in faster. You also need to manage your outgoings to avoid any cash flow problems down the line. Keeping on top of your cash flow is also important for:

Making better-informed decisions: When you have an accurate cash flow statement, you’ll know your bank balance available at any moment, helping you to make informed decisions.

Understanding where your money is going: Having a good understanding of where your money is going (and why) helps you spot areas of the business where you might be overspending.

Protecting business relationships: If you experience cash flow problems, you can end up without enough funds to pay your suppliers. This could damage your relationships and reputation.

Expanding the business at the right time: Growing a business needs a lot of cash. When you properly manage your cash flow, you'll know when it's the right time to expand without running into problems along the way.

What impacts business cash flow?

Overhead expenses and indirect costs: if your business running costs are more than what’s coming into the business, this can limit your cash flow.

Receivables management: the speed at which your customers pay for goods or services will impact the amount of money coming in and the business's cash flow.

Investing and financing decisions: if you decide to buy expensive equipment or new office space for your business, it can decrease your cash flow dramatically. How your business chooses to fund these purchases will also affect cash flow.

The economy: the status of the economy can play a significant role in the amount of cash flow a business has. A recession, for instance, will have a significant impact on cash flow.

Cash flow projection

Cash flow projection is a breakdown of the money you expect to come in and out of your business. This will involve calculating all your predicted income and expenses within a certain timeframe to provide you with a clear idea of how much cash will be leftover.

Predicting the flow of money in and out of your business helps you to plan, make smarter choices, and avoid any cash flow problems. The key to an accurate cash flow projection is effective cash flow planning. Our cash flow forecast template lets you project future cash flow performance.

Why is cash flow planning important?

Cash flow planning enables you to create cash flow projections for the upcoming months and is smart business management. It allows you to avoid or prepare for any financial shortcomings while also enabling you to create a more accurate financial plan. While making sure you have enough money each month to keep your business running, cash flow planning gives you a better overall idea of the money your business is making, where it's coming from, and where it's going.

Getting started with a cash flow plan doesn't have to be complicated. Here are the basics:

  • Identify your business goals and how far ahead you wish to plan
  • List all monthly expenses that make up your business's outgoing cash flow
  • Create a list of all incoming cash you expect each month

Once you have these foundations, you can calculate your monthly cash flow. You can do this quite easily by subtracting your outgoing money from the money coming in. You’ll then have either a positive or negative cash flow for the month.

How can cash flow software help?

Many businesses use cash flow software to help them better control their cash flow and make better business decisions. That's why iwoca has partnered up with Futrli to offer businesses an effective way to manage their business cash flow. Combining the two means you get great insight into your business data and greater control of your business's finances.

With iwocaPay, you can look forward to getting your invoices paid much sooner. Businesses can spread invoice payments over three months, while you get paid upfront each time.

Meanwhile, Futrili Predict is a valuable forecasting tool that enables businesses to predict their business cash flow. By creating intelligent financial predictions across all areas of your business, you'll have a clear insight into the future financial health of your business.

Cash flow loans for small businesses

Having a good amount of working capital is crucial for a small business. If you have limited working capital, iwoca offers cash flow support through small business loans. Whether you’re a small startup or just need a cash boost, cash flow loans for small businesses can help power growth — from bridging gaps in business cash flow to covering the cost of large stock orders or investments..

iwoca carefully tailors loans to each customer. Your loan amount and the interest rate are based on the performance of your business. To be eligible to apply for an iwoca business loan, your business must be based in the UK. You must also be a sole trader, partnership, or limited company, and aged over 18.

Understanding cash flow is a basic building block for managing your business finances. Once you've achieved that, you can start thinking about improving your margins and profit and growing a healthy, sustainable business.

To find out more or to apply for a business loan from iwoca, call us today on 02037780629 or email us at support@iwoca.co.uk

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Charlotte is a PR & Communications specialist at iwoca.

Article updated on: 21 September 2021

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