Cash Flow Analysis

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Tips & Advice to help you make your decision on Cash Flow Analysis

Many businesses find that it is difficult for them to forecast their financial futures because they do not have access to the proper tools. By using cash flow analysis software, though, you might find that you can make better sense of your financial information. This could give you a clearer picture of your business's past, current, and future performances.

Cash flow analysis software can include a wide range of features that might meet your business's needs. For instance, some programs have the ability to condense diverse financial forms into a single statement, making it easier for you to understand your business's performance. Some software also uses reliable financial models to calculate the areas of your business that perform best while indicating those that need improvement. This could help you make better decisions that improve your company's future.

Business.com can help you explore your software options so that you can make an informed choice. The links posted at the left side of the screen will take you to websites that offer information about a variety of analytical tools that can help you understand and project your cash flow. After examining several of these sites, you should have the information that you need to choose a reliable program.

Calculating Your Business Cash Flow

Cash flow is a measure of the amount of money your company makes and spends during a given period and is frequently used as a barometer of your company's health and worth. Accurately calculating your company's cash flow is vital in determining if your company has enough money to operate. Understanding your cash flow lets you evaluate:

Borrowing needs
The timing of new hires and major purchases
The timing of payables
Product pricing and the amount of credit granted to suppliers
The need to make strategic cost-reduction decisions

Use a cash-flow modeling spreadsheet template

Accuracy is critical with cash-flow forecasting. Thus, a tested spreadsheet template will contain formulas that will work. The best spreadsheet templates offer easy-to-understand graphics.
Try: Develop cash-flow projections using Grand Valley State University's downloadable Excel spreadsheet. Study up on Excel's collaborative, charting and other advanced features.

Perform "what if" analysis

Find break-even points for each of your product or service lines for each of your departments. Create three or more projections detailing best-case, worst-case and most likely scenarios based on the current economic situation and your company's growth goals.
Try: Use Microsoft's training resources to perform "what if" analyses using Excel. QuickBooks users can contact professional advisors through the software vendor's website who are specially trained to customize the popular accounting software package.

Assemble financial records and employee forecasts

Set aside a multi-day period when the key people within your company can formulate their own departmental cash-flow projections, then add these forecasts to your own.
Try: Acquaint employees unfamiliar with cash-flow forecasting with MindTool's tutorial, which will walk them through the process of forecasting cash flow properly.

Maintain a record of cash flow forecasts to improve your accuracy over time

Create multi-year charts comparing cash-flow projections to actual year-end results.
Try: QuickBooks' Premier Edition embeds forecasting functions within the popular accounting software suite, and shows you how your company's numbers compare to norms within 120 different industries. As your business grows, so will the complexity of its cash-flow projecting spreadsheets. Browse available software packages at Capterra's Business Performance Management Software Directory

Improve your cash flow by keeping cash in an interest-bearing account.
Bill your clients regularly to keep cash flow coming in.
Keep bankers and other creditors informed of your company's cash-flow projections.
Assign values to forecasting spreadsheet inputs to help rank their importance. Will it be critical for your company to receive timely payments from key customers during the spring, for example? If so, focus your collection efforts when needed.