Many people started thinking seriously about creating a startup during the pandemic lockdowns, but the truth is that running a business is tougher now than ever before. It’s a difficult time for entrepreneurs with the ongoing market volatility due to fiscal policy adjustments, tax changes, inflation, economic news, and other national and global events that are out of everyone’s financial control. No matter how strong a business is, it will always face adversity. That is why for existing businesses, having a weekly cash flow forecast is essential in order to survive today’s challenges.
As the name implies, a weekly cash flow forecast is an estimation of a company’s cash movement made on a weekly basis. The process of monitoring and recording expected cash inflow and outflow is a significant part of a business’s cash management plan. This report is done to estimate the company’s liquidity and is ideally forecasting for a period of about 13 weeks (one fiscal quarter). It offers the business enough wiggle room to create corresponding actions, but should not be so far off that it makes the forecast null and invalid.
Why do Businesses Need a Weekly Cash Flow Forecast?
Do businesses really need to have a weekly cash flow forecast or does it just make for extra admin? Yes, financial experts agree that they are necessary. Aside from helping entrepreneurs avoid sleepless nights and get peace of mind, here are some of the reasons why a weekly cash flow is essential to a business:
To improve cash management
The first two years are a make-or-break time when running a small business. A lot of movement happens, and capital costs are still yet to be realized. With the flow of revenue slowly coming in, a weekly cash flow forecast can help an entrepreneur understand the intricate financial movements of their company as well as the process of converting assets into cash.
To minimize or eliminate the demand for borrowed funds
Once liquidity has been established, a weekly cash flow forecast helps preserve a stable cash supply in the business. The result? Fewer business loans because cash going in and out is more predictable as a result of the forecasts. Reserve cash can be reinvested to pay for dividends, credit arrangements, and other operational expenses like employee salaries and rent.
To identify business growth needs
When using a weekly cash flow forecast, a business becomes aware of its seasonality and cash cycles. When a cash flow forecast is planned and designed, it can quickly and easily uncover a financial setback or a hiccup in the expected inflow. Weekly forecasting helps maintain control over monetary and financial policies. Plus, the details of a weekly cash flow aid in identifying rough patches and unchecked errors more thoroughly than a monthly and quarterly forecast can.
To understand client and supplier financial behavior
When the suppliers are slow payers, or if most of the customers prefer paying in installments, there is a visible impact on the company’s cash supply. Having a weekly cash flow forecast allows entrepreneurs to keep track of and organize their clients’ and vendors’ payment schemes. It also helps in negotiating contracts and ease in communicating for discounts, extensions, and enforcing terms of payment. If the purpose is simply to remind about payment, expanding the goal to advance a new profitable opportunity can also strengthen a business relationship.
Why is Hiring a Trusted Advisor the Best Option?
When a business does not have an internal finance team handling cash flow forecasts, hiring an expert can be a good idea. They are generally able to deliver more organized accounting and effective financial strategies. Some points to consider when deciding which kind of financial expert to add to your team:
- Using a CPA can be a great help when it comes to managing financial data especially when audits, taxes, and law compliance are involved. They make it a point that a business's finances, including the weekly cash flows, are recorded accurately in books. They are responsible for improving and troubleshooting miscalculations in the budget, payment, and cash flow.
- An outsourced CFO on the other hand, assists in creating financial insights, strategies, and–you guessed it–business forecasts. Based on industry operations, performance, plans, and goals, they keep track of the expenses and profitability and use historical cash flow movement to create financial policies and procedures for the long term.
- A financial coach or a trusted advisor can also utilize weekly cash flow forecasts to ensure business owners make a well-informed decision about their cash management and overall growth.
While they differ in roles, financial experts build and maintain cash flow forecasts to fine-tune financial strategies. They have the professional experience and capabilities to dig deep into the current financial conditions and come up with solutions to answer critical questions involving collection, payment, and maximizing returns on current and future assets.
The Reliable Way to Maintain Cash Flow Forecasts
Today’s digital advantages make a lot of tools available to the market that can help keep track, manage, and forecast your weekly cash flows. For the best way to manage your weekly cash flow forecasts, find an app that is simple and easy to use but with an unlimited range of scenarios to catch all risks and possibilities. Choose one that has a practical and convenient way to make tasks fast, simple, and clear by including a cloud accounting system tied with modern forecasting software, like Dryrun.
Dryrun is a reliable cash flow forecast tool that uses accounting data to manage a business’ cash flow better. By integrating daily imports from the existing cloud accounting software used by the business, actionable weekly cash flow forecasts can be made visible to key stakeholders, financial advisors and analysts, and across departments and teams.
A weekly cash flow forecast is essential to a business because it helps accelerate growth by ensuring owners build business relationships and have an appropriate cash reserve for backup in tough times. With the use of trusted forecasting software and the services of a financial expert, maintaining a weekly cash flow forecast helps keep businesses afloat while developing cash management plans for both short-term and long-term growth.