2. Create a cash flow statement and forecast regularly
Cash flow measures all expenses that go in and out of your business within a specified period.
Matched fluctuation in revenue and operating expenses mark healthy cash flow. The only way to achieve healthy cash flow is by implementing and regularly operating with a cash flow forecast.
To create better projections, examine your current cash flow by creating acash flow statement(or statement of cash flows).
A cash flow statement shows how shifts in balance sheet accounts and income impact cash and cash equivalents. The Small Business Administration (SBA) recommends performing a cash flow analysis monthly. This analysis can help ensure your small business has enough incoming cash to handle the next month’s obligations.
Cash flow forecasts are similar to ordinary business budget plans. Forecasts should narrowly estimate all business income and operating expenses on a monthly or quarterly basis.
When done effectively, your cash flow forecast should help give you a better picture of your working capital and expectations. Forecasting can also help you determine future financing activities and examine which expenses you can afford.
