How to create an accurate business cash flow forecast

Have you ever wondered how your business performance will be next year? It's not an easy question to answer. With so many different factors that can affect your company's financial statement, it can be difficult to predict. That's why we've created this blog post! We'll show you a 3-way cash flow forecast and teach you how to create one2 of your own so that you're able to accurately measure performance measures like KPI's, a balance sheet and other business metrics and make more informed decisions about what needs improvement in the coming months.

When making business forecasting, there are various methods that may be chosen. A 3-way cash flow forecast is one type of forecasting that can provide the most accurate analysis of your net income.

It's always fun to try and predict the future. But you can't just make up predictions! You need as much data as possible in order to have the most accurate business forecast, such as 3-way cash flow forecasts, for example. It may not be easy but it will help answer your questions: how are you going to set targets? How do we know where our investment is spent? And when might we run out of cash?! Forecasting daily or weekly gives us a better chance at answering these questions by gathering more accurate information that needs consideration from all aspects of business growth and development

Include these key three financial statements

Balance sheet: A balance sheet summarises your assets, liabilities and shareholders’ equity at a specific point in time. It is what the company owns and owes, as well as the amount invested by shareholders.

Profit & loss (P&L): This summarises the revenues, costs and expenses incurred during a specific period of time, usually a fiscal quarter or year. It shows your business’ ability to generate profit by increasing revenue, reducing costs, or both.

Cash flow statement: Cash flow statements records the net amount of cash and cash equivalents being transferred. It allows investors to understand how your operations are running, where money is coming from, and how it’s being spent.

That's right! We need the old school numbers to predict financial performance, but we also need to know how our KPIs are shaping up. You can't just plan for finances without knowing where you stand on other metrics, such as a balance sheet, profit and loss and a cash flow statement too in order to make a sound business decision and be confident that your forecast will hold true.

Get a granular view of your business forecast by measuring KPI's

These quantifiable measures determine how well your performance against your operational and strategic goals. Breaking down your targets into KPIs makes measuring the success of your business performance manageable.

Allocate these metrics to each department of your business and have your managers monitor them. By doing this process you’ll find your team are working in unity. Managers will have a much deeper understanding of your business performance, knowing exactly what results which you expect and the company needs to move forward. They can be financial or non-financial, so every one of the performance indicators and business metrics can be looked at.

KPI examples

We’re going to look at the type of metrics you need to measure in a pub or a bar. Here’s an example of some specific business metrics:

• Wet (drinks) sales gross profit
• Average customer headcount
• Average customer wait time
• Waste %
• Dry (food) sales gross profit

The bar owner measures things that directly impact their revenue and financial performance. For example, the process of measuring the waste % shows the return you’re getting from your expenditures.

You can see that a business owner needs to know more than just the financial KPIs. There are also non-financial drivers of revenue, which should be taken into consideration when forecasting future profits and losses. These figures need to be included in either Snapshot or Report cards on Futurli for an accurate report.

Creating your forecast in Futrli using a financial statement

There are 7 ways to create a new budget, business or scenario. They’re all created in the same place to streamline your experience.

You can use your historical data to instantly create a picture of how you expect the business performance to change in the future, for example by using the last year’s actuals option. You now have a full forecast built in around 5 seconds, using last year’s operational data as the baseline. Hit ‘New’ on the forecast page next to your organisation and you’ll be presented with the varied options.

On this new scenario page, choose last year’s actuals and ‘Quick create’, then press ‘Build’. This is an accurate projection of where your business is going to be in the coming future. It’s simple and very effective.

To get the most out of your forecast, check it regularly. Monitoring your figures on a regular basis will see your business performance take an uptick in success.