3 Tips for Creating Cash Flow Projections

Does your company experience ebbs in revenue at times? Or periods of particularly heavy costs? Is growth constraining your cash position? Creating cash flow projections will help ensure you'll always have adequate cash to pay the critical bills, like payroll and rent. Don't worry, it's easier than you think and you can get started with these 3 steps:

1. Look to Past Income

Have your bookkeeper prepare a report of your incoming payments over a representative time period to provide you with a view into the timing of your income. Take note of the deposits. Which customers paid when? Based on the deposit history, calculate the income you can reasonably expect each week, for the upcoming six weeks or so.

2. Study Payment History

Next, you'll want your bookkeeper to run an expense report that itemizes when payments were made over the same time period as above. As you browse through your transaction history, take the opportunity to confirm all ongoing expenses are necessary, particularly during lean months. Use this historical information, to determine your expected weekly outlay for bills.

3. Project

Enter your income and expense estimates into a spreadsheet and check it weekly against your actual numbers. We make this part easy – just reach out to us and we’ll send you our free cash flow projections template.

Always remember to tighten the purse strings while revenue is at a low and adjust your estimates accordingly. And during periods of thin cash flow, keep in mind that rent, payroll and loan or credit card payments need to be paid at certain times, but other expenses may have some leeway from a timing perspective.

For more information about creating and using cash flow projections, read our full article. 

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