Inca COVID-19 Update 11: Avoid a Cashflow Crisis: Take Control of Forecasting
17th April 2020
Every business owner knows that ‘cash is king’. It’s the most vital asset in any business, and a cashflow crisis can spell the end of a business – even one that’s otherwise trading healthily.
Here’s what we know:
Forecasting cashflow is crucial to making effective financial decisions, and now more than ever, you need to be able to understand your cash position at any moment. You need to know precisely how much cash you have in your business, how much you owe and are owed, and when money is due to be paid out or received. In short, you need a forecasting tool that can take all your financial information and use it to predict your future cashflow position – one that will allow you to make adjustments to reflect real-world changes as they become known.
If you plan to apply for a Coronavirus Business Interruption Loan (CBIL), your lending bank will require you to produce a cashflow forecast – or at the very least, a profit forecast.
Be careful if you do use a profit forecast. It won’t take account of loan repayments or the effect of bills being paid later than planned. For example, a profit forecast would show no impact for wages reimbursed under the government’s Job Retention Scheme, because your business will be repaid all or some of the money by HMRC. But the timing of the reimbursement could be critical to the survival of your business.
A true cashflow forecast is far more accurate because it will reflect the anticipated movement of money in and out of your business.
Use an online solution to help you take control of your forecasting
The good news is that if you use Xero or QuickBooks, there are tools already out there that will integrate seamlessly with your accounts software and provide cashflow forecasting.
The one we use here at Inca is called Fluidly, and you can get started for FREE. A zero-cost subscription will allow you to prepare a three-month forecast – which might be enough to get you through the current crisis. If you’re applying for a CBIL loan, or you want to project further ahead, then the full version is available for £79 + VAT per month – reduced to only £39 + VAT per month for Inca clients.
Get in touch with us now to discuss your cashflow forecasting requirements. Depending on the accounting software your business uses, we can recommend the options that are open to you.
We hope you find this information useful. Please feel free to share it with other business owners in your contact sphere.
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