The Beginner’s Guide to Cash Flow Forecasting, According to XO Accounting

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Forecasting cash flow, explains XO Accounting, is the process of predicting a company’s future financial position and estimating how much money will be needed to pay bills, cover expenses, and meet obligations. This will help business owners avoid running out of funds if cash flow slows down in the future. A cash flow forecast consists of three components: the opening cash balance, cash inflows and outflows. Cash inflows include cash sales and debt collections, while cash outflows are items such as utility expenses, rent, loan repayments, and payroll.

Xero Account XO Accounting advises business owners to plan for best-case, worst-case, and realistic, moderate financial scenarios when developing a cash flow scenario model. This will provide a holistic view of the future, whatever the circumstances.

To create the most accurate cash flow forecast, business owners need to enter all of their cash flow data at the end of each week and then compare it to what they planned for that week. This will reveal inaccuracies and help business owners understand why the forecast may have been inaccurate. Business owners are reminded to include annual payments, loan repayments, credit card debt repayments, and estimated taxes in all forecasts.

While forecasting cash flow may take some getting used to at first, XO Accounting assures business owners that it could be the difference between their business’s success and failure. Whether business owners are looking for help with forecasting cash flow, help with resident director services or anything in between, XO Accounting is here to help.

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SOURCE XO Accounting


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