Cash flow Projection Predicts the Future of Your Business
A business is a mix and match of different aspect like sales, marketing, operation, administration and finance. If all the aspects or factors are not dealt with properly and enough time is not spent in managing them then our business is bound to have problems. Unfortunately small and medium businessmen and people who have newly started their business are very aggressive about their sales and marketing planning forecasting and projection. And in that process tend to lose track of their cash flow and cash flow projection. Their attention turns to operational activities and sales and marketing activities and strategic planning for earning more business. But is it not important to have an aggressive sales and marketing planning forecasting and projection? In the end the revenue that will be generated will be from the efforts that will be put into marketing and sales activities. Cause the dollar amount that is being earned will come from the existing and new clients and the prospective clients can be converted into new clients only from the efforts put in by the sales and marketing activities done. So it is necessary to focus on the sales and marketing activities that too when you are starting your business.
Yes it is very much true that sales and marketing activities are necessary not only to take the business to the next level but also to sustain in the market. Because to run the business successfully and be able to pay the bills you will need to have clients for whom you will either provide your products or your services. Yes you have aggressively planned your marketing and sales activities and you have been successful in getting new clients for your business. You have also been successful in your operations. But do you have any idea about your cash flow? Do you know as to what the inflow is and what is the outflow of your cash? How much revenue is being generated and how is it being spent? Whether the amount that you are expecting as profit is being met or not? Whether you are actually earning a profit or not? If you are not earning profits then what is the reason for not being able to earn profit? Is it because your revenue generation is less or is it because your expenses are high. What is the amount that you will need to invest in your business? What are the financial problems you might face in the near and distant future? What is your long term and short term financial goals? As a businessman you should be asking these questions to yourself on a regular basis. If you have not asked yourself these questions then it’s high time that you started to ask yourself these questions. And if you have asked yourself these questions, then were you able to answer each and every question? If no then either you have not done your cash flow projection or your cash flow projection is wrong. In both the cases your business is in trouble.
But why is cash flow projection so important? With a help of some business acumen and experience it is easy to understand how much is needed to run day to day operational activities and whatever is left after the expenses is your profit and you can either save it or invest in increasing your business. It is not as simple as we think of it to be. Cash flow projection helps you to understand the exact amount of cash that is needed to run the business successfully according to the present economic conditions. It also helps you to calculate the amount of money that you will need in the future with the increase in the expenses. It will also help you to project your growth rate of your business and how much ready cash you will need in case of there are some financial crisis and the market is not as good as it was expected to be. Because the market is very volatile and it is very hard to predict the nature of the market. A contingency plan has to be kept ready, so that you are able to switch over if your plan is not functioning as expected. And this is where your cash flow projection comes into the picture.
How can the process of cash flow projection be simplified? For people who run small or small and medium business units, it is very difficult to take out time and do a cash flow projection in an excel sheet. There are chances of very minor errors happening which might give a totally different picture of where the business is really heading. Your business might actually be running successfully and might have a great financial future but if there is a small or a minor change in the data or information while calculating the cash flow projection then it might end up showing loss in your business and you might be focusing on a totally different area which needs no attention from your side. In order to make sure that your calculation is being done accurately and you have the history of the calculation made in the past. You also don’t have to worry about your data being lost or calculation being wrong. These tools are very simple yet very affection in helping you make a precise cash flow projection for your business and help the financial future of your business and prepare yourself for any eventualities that might hit your business negatively.
