Better cash flow planning in 5 steps

Liquidity management and cash flow planning for entrepreneurs

Five simple steps to make your cash flow planning more successful. You are now wondering how planning can be successful? In our view, by (1) being simple, (2) taking little time and (3) giving a good picture of your future priorities and their financial impact. We have put together a complete introduction to the fundamentals of cash flow planning in this article.

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Step 1: Remember that cash flow planning is a process

The goal of cash flow planning is to learn from progress, not to achieve perfection. If you replace the past months in your plan with actual figures step by step and use what you learn to refine your approach, you will see that your forecasts become more precise. The most important thing is to start!

Step 2: Make use of your team

When drawing up a cash flow plan, it is important to take into account different perspectives from all areas of your company. That way you can not only check your own planning assumptions, but also create a shared understanding of your company’s priorities.

Step 3: Do not assume that what happened before will happen again

Groundhog Day all over again? Your business follows the same pattern year after year? But that does not necessarily mean that it will repeat itself in exactly the same way. Also check whether your financial resources are sufficient to absorb, for example, any delays in payments from customers.

Step 4: The most important thing is to choose an approach and start

There are many, many different planning models in Excel and by now also a few cash flow tools. From a financial and entrepreneurial point of view, the aim is not to fall into false precision. Our experience shows us that a rougher plan is often more accurate and more helpful than a complex statistical framework of figures.

Step 5: Look for the small improvements

Small, incremental changes are better than not starting at all or striving for perfection right from the outset. Do not forget that at the end of the day this is about the famous crystal ball. By refining your forecast over time and applying what you have learned to your company, you improve your financial decisions and resources.

And this is important:

If you do without planning, you may be accepting failure. And that applies to cash flow planning in particular!

Credits: Photo by Jimi Filipovski on Unsplash