Make the right business decisions – using cashflow forecasts

With the COVID-19 virus, business is facing unprecedented impacts on their trading. Many businesses are having to cope with change and needing to make fast, informed decisions about what they need to do to stay afloat. And the key to staying afloat is having sufficient cash or access to cash when it is needed. There is no point finding out that you are in difficulties after the fact – you need to know ahead of time to put measures in place to avoid bad outcomes.

It is a time to have accurate records. It is a time to know what your minimum financial obligations are, so that you know how much money you need to be solvent and it is a time to predict what your cash balances are going to be in the coming months. By doing these things, you are in a position to be able to plan changes in order to avoid disaster. Cash flow forecasts allow you to put in cash inflows and outflows that you believe are achievable to predict future cash balances, but also allow for different scenarios. For example, you might want to look at the effect of borrowing or receiving a grant, or putting your staff onto part time, or if the economy starts improving in say 2 months time or 6 months time. These “what if” scenarios are really important for making decisions at the right time.

How do you cash flow forecast?

1.You need to think in terms of cash, not profit.

a. You need to think about what uses cash – purchases of assets such as cars, reduction in liabilities such as paying off credit cards or paying out loans, reduction in equity such as owners taking out cash from the business and of course, paying expenses.
b.You need to think about what provides cash – sale of assets such as stock or equipment, increase in liabilities such as taking out loans, increase in equity such as the owner contributing personal cash to the business, and increasing sales and collecting payment from your customers. In the current conditions, also think about the grants that may be available to your business too.

2. Timing is important.

You need to think about each month and how much cash will be increased in that month and how much spent. For example, if you make $100,000 in sales this month, you need to think about what proportion will be paid in this month, and what proportions in subsequent months.
You can use your reports from prior periods to see what the trends are in your revenue collection and bill payment, in order to project into the future. Of course, you need to apply your knowledge of what is happening in your industry in order to adjust the figures for the future.

3. Account for provisions.

Every business has obligations that need to be met periodically. You need to pay your GST, your PAYG, your payroll tax, fringe benefits tax, company tax, superannuation – in your cash flow forecast, you need to enter the amounts you expect to pay in the relevant months.

4. Know what your minimum cash requirement is to keep trading

If you know your total provisions, your staff entitlements for annual leave, long service leave, your creditor balance, your loans and possibly your obligations in case of terminations or redundancies, then you have a fair idea of what the minimum amount you require to continue trading.
Then you use a spreadsheet or cashflow software such as Calxa to predict your cash movements.

With the system that you are using, you need to know what your current cash balance is, then month by month, add in your cash receipts and deduct your cash payments and work out a closing cash balance at the end of each month.



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If you are interested in knowing more about Calxa or want help in creating a cash flow forecast or help in using Calxa, you can contact us on

Also, check out our COVID-19 Resources Page for the latest news and updates.