Regularly reviewing your cash flow and forecasting future trends is a big part of staying on top of cash flow management. Unlike controlling cash flow which focuses on reducing expenses, monitoring and forecasting involves consistently tracking both incoming and outgoing cash to identify any shortfalls early and adjust plans accordingly. Forecasting enables you to anticipate potential cash shortages and take proactive measures, such as securing a line of credit or renegotiating payment terms with suppliers, or delaying non-essential expenses before any financial strain occurs.
A business, for example, might predict a cash shortfall in the upcoming quarter due to a seasonal dip in sales. Identifying this in advance allows them to negotiate longer payment terms with suppliers, arrange financing, or implement cost-saving measures to bridge the gap without disrupting operations.
Stay updated! Subscribe to the ELISA weekly newsletter.