6 Ways Cash Flow Forecasting Can Help Small Businesses Grow
                     6 Ways Cash Flow Forecasting Can Help Small Businesses Grow 
 
 
 
When it comes to the future expectation of profit and loss, entrepreneurs tend to know their 
finances inside and out. They know the margin they'll make on each product and have an in-
depth understanding of their overheads. 
 
What business owners don't necessarily know inside out is how and when changes to sales, 
purchase, or any other business costs will affect their bank balance. This is where cash flow 
forecasting/management comes in. Cash flow forecasting helps a business measure the positive 
or negative impact that is caused by even the slightest change in costs. 
 
Why is Cash Flow Forecasting So Important? 
 
It's imperative for a business to recognize the profit earned at the end of a given month. But the 
calculated profit doesn't mean that the company has this much cash coming into the business. 
Without cash flow forecasting, it would be nearly impossible for a business to estimate how much 
money will be flowing in at a given time. Moreover, if they don't forecast the cashflow, it will be 
impossible to make an informed business decision or to plan for any change, or even enable 
business growth for that matter.  
 
Let's discuss how cash flow forecasting can help small businesses grow: - 
 
1. Helps Gain Confidence in Your Financial Systems 
 
Probability doesn't necessarily mean that your business graph will move upward, or that 
you have cash in the bank. 
 
The answer to this lies in the process of cash flow management. A profit and loss sheet 
only tell you part of the story; without a firm grasp on cash flow, you are not getting the 
actual picture of your finances.  
 
Cash flow forecasting can reveal where you need to tighten payment terms, cut overhead 
expenses, or hire new staff. It is a godsend not only for business owners but also for small 
business accountants as it helps to provide critical advice for business planning. 
 
2. Budget More Productively by Tracking Revenue and Expenditures 
 
Cash flow forecasting helps identify and analyze your current revenue and expense 
budgets and whether they are accurate or not. You'll be able to control and monitor all 
incomes and expenses, providing you with the necessary time to adjust ensure your 
business stays on track.  
 
3. Monitor and Manage Cash Deficiencies Proactively 
 
By figuring out your cash flow movement in real-time, cash flow forecasting allows small 
business accountants to consider proactive future cash deficiencies and convey the same 
to the business owners. It is pivotal for a small business or startup to know when and from 
where the money is coming in and moving out. Using cash flow forecasting tools or an 
online accounting system can help to identify cash shortages well in advance, giving you 
the time cushion, you need to prepare yourself. 
 
4. Determine and Spot New Growth Opportunities 
 
Cash flow tools are immensely popular in online accounting as it helps anticipate a 
business's future cash levels, allowing them to determine which new business 
opportunities are worth investing vs. passing on. Your small business accountant can use 
these tools to spot cash surpluses that can be reinvested for business growth. 
 
5. Scenario Plan for Future 'what if' Questions 
 
With so many small businesses being disrupted each year, it is not always clear which path 
is best for your business to stay ahead of technological and innovation changes. With a 
cash flow forecasting tool, small business accountants can explore the impact of different 
decisions on your business's cash flow. This can prove to be pivotal in hypothesizing the 
feasibility of your plans. 
 
6. Determine Flexibility in Overcoming Issues and Making Critical Decisions 
 
Companies that operate down to the wire can limit their options, leaving themselves 
exposed and with very little room for error. 
 
By forecasting your company's cash flow, online accounting systems measure your ability 
to face financial problems and to test the impact that decision made on using your cash. 
The forecast will assist in determining how much money you should keep as a financial 
buffer, and this buffer can give you the flexibility to make mistakes.  
 
Bottom Line 
 
Regular cash flow management is a critical part of any business planning strategy. It can help you 
make or break your business. It makes you aware of changes to your finances before you hit "an 
all-time low" point. Improving your awareness of how and when the money is flowing from your 
business strengthens your ability to make the right decisions at the right time. So, reach out to 
your accountant and get information about your cash flow, and if you don't have an accountant, 
well, buckle up and look for a small business accountant right now.