Better cash flow planning in 5 steps

Better cash flow planning in 5 steps

Liquidity management and liquidity planning for entrepreneurs

Five simple steps to make your cash flow planning more successful. You are now asking yourself how planning can be successful? In our view, by (1) being simple, (2) taking little time and (3) mapping your future priorities and their financial implications well. We have provided a complete insight into the basics of liquidity planning in this article.

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Step 1: Remember that cash flow planning is a process

The goal of liquidity planning is to learn from progress, not perfection. If, step by step in the planning process, you replace past months with actuals and use the lessons learned to refine your approach, you will see your forecasts become more accurate. The most important thing is to start! 

Step 2: Use your team

When creating a cash flow plan, it is important to consider different perspectives from all areas of your business. This way you can not only test your own planning assumptions, but also create a common understanding of your company's priorities.

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

And every day the groundhog says hello? Your business follows the same pattern year after year? But that doesn't necessarily mean it repeats exactly like that. Also check whether your financial resources are sufficient to compensate for any delays in payments from customers, for example.

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

There are many, many different planning models in Excel and now also a few cash flow tools. From a financial and entrepreneurial point of view, it is important not to fall into a false sense of accuracy. Our experience shows us that coarser planning is often more accurate and helpful than a complex statistical framework.

Step 5: Look for the small improvements

Small, gradual changes are better than not starting at all or aiming for perfection right at the beginning. Remember, it's all about the famous crystal ball at the end of the day. By refining your forecast over time and applying what you learn to your business, you improve your financial decisions and resources.

And important:

If you forgo planning, you may accept failure. And this is especially true for cash flow planning!

Credits: Photo by Jimi Filipovski on Unsplash