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Cash Flow Forecasting – A necessity for UK SMEs

01 MayMark PickenCash Flow

One of the most important aspects of financial business management is the practice of cash flow forecasting. Whilst it may sound like another headache of calculations, the exercise is in fact a simple process that can prove extremely important in the long-run.

In simple terms, cash flow forecasting is about predicting future levels of cash to ensure your business has enough to survive on. Normally done for each month, the result of a cash flow forecast is an estimate bank balance at the end of each period covered. When done effectively, cash flow forecasting can even work seasonally, meaning that you can plan for specific variations in cost depending on the time of year. With gas bills for example, a good cash flow forecast would recognise that these costs are likely to experience a sharp increase during the winter months, and would give management the opportunity to plan in advance.

The importance of cash flow forecasting is relatively straightforward – if a business runs out of cash and cannot source any emergency finance, it will become insolvent. Whilst it should be used by all businesses, cash flow forecasting is especially important for start-ups and small enterprises, that may experience difficulty in obtaining investment. What’s more, regular cash flow forecasting can even help when it comes to securing a loan or an overdraft facility, as certain banks and lenders may want some sort of assurance that the overall health of the business is sound.

For more ways in which you can improve your cash flow, why not have a look at our ’10 ways to keep cash flowing’ download?

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Tags: Cash Flow
prev 5 Resolutions for UK SMEs next UK SMEs turn to alternative finance in the face of dwindling bank loans
Mark Picken

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Shire Leasing PLC is Authorised and Regulated by the Financial Conduct Authority for certain types of consumer credit lending and credit related activities that are regulated under the Consumer Credit Act 1974 and by the Financial Services and Markets Act 2000.  For certain types of products Shire act as a lender and a broker and for some products we act as a broker only.

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