While there is always a thirst for businesses to expand right away, most companies would prefer to first have predictable cash flows instead. Consistent cash flows enable companies to adjust operations based on shifting demands and resources.
These are five ways for your company to be able to forecast business cash flow well:
1. Hire an IT company.
One of the great things about seeing all the technological advancements in the world now is that it stabilizes the expenses that come with operations. Tech will also be able to produce the improved or, at least, the same level of effectiveness even while using up lesser resources.
Plus, it also produces the desired output that you want to have. There are office support IT solutions that will be able to assist in your goal of having a more stable and predictable business cash flow.
2. Do a rolling 120-day cash flow forecast.
Forecasting the cash flow of a business is a major task for entrepreneurs as well as managers because the company should have a stable financial status. According to Inc., it is normal for a business to have a cash flow prediction over the next four months. You might want to put the number in spreadsheet form so that it will be easier for you to keep track of everything. If your business has seasonal trends, you may want to check the numbers from the same season last year for a more accurate picture.
3. Improve customer experience.
There is a reason why 62 percent of companies think that better customer experience affords them a better position as a market competitor. If there is one thing that would make a customer stay loyal to a particular brand or company for a long time, it is a pleasant customer experience.
This can come in the form of incentives and loyalty perks. When a business is able to retain more customers, the value of the company goes up.
4. Forecast and plan external factors.
The business industry, no matter what field your company is operating in, has a volatile nature. There will always be something external and beyond your control that can impact the operations of the company.
For this reason, you need to plan and predict ahead these scenarios so that you can minimize the effects it can have to your operations. You may want to change operational structures and protocols to accommodate these potential risks.
5. Secure longer-term contracts with customers.
In a general sense, having contracts with longer terms usually gives you more freedom to properly predict the cash flow of your business. This is especially multi-year contracts so you might want to improve from month-to-month or order-by-order deals. Not only will this give you more financial security, but it can also help you anticipate your potential earnings.
It may seem hard to transition to more IT-based operations or longer contracts with customers. But you will find that it affords you better financial forecasting, which is great for your business.