How to Spot a Negative Cash Flow Forecast Early

Posted by Anonymous , 9/4/2007 Tags:SpotNegativeCashFlowForecastEarly
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How to Spot a Negative Cash Flow Forecast Early

Introduction

The difference between a successful business and an unsuccessful one comes down to cash flow--the amount of money that is coming in and the amount that is going out of the business. The wise business owner learns how to spot negative cash flow early enough to stop a downward spiral. Here are some important steps you can take to help keep your cash flow on the plus-side of the balance sheet and to spot a negative cash flow expeditiously so as to eliminate it immediately.

Instructions

Difficulty: Challenging

Steps

1

Step One

Use a computer-based accounting system. Most businesses do this already, but if yours doesn't, then you should find one that is right for you. By using this kind of system, you can call up vital reports to help you watch for cash-flow problems.
2

Step Two

Monitor your overall and projected monthly billings. By measuring the difference between the two, you can see if your gross income is meeting projections. If not, you are leaking cash.
3

Step Three

Review collected billings versus your budgeted cash-flow needs for the month. If you are not taking in enough money to cover these needs, you are going to lose cash on them at month's end.
4

Step Four

Look at your actual costs and your budgeted costs. Doing business is not cheap. If you are laying out more money than budgeted on the cost of running your business, you need to cut back on these costs or increase your income. If you have to do this, you may have a negative cash-flow problem on the rise.
5

Step Five

Assess your receivables. Fifteen percent is considered quite high. Five percent is manageable. Remember that accounts you do not collect on cause fissures in the body politic of your business that will eventually cause you to bleed out.
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