Forecasting Cash Flow

Focusing on cash is crucially important. Cash flow forecasting can help you estimate (and adjust) this key question: What steps can you take to maximize cash and, thereby, extend as long a time frame as possible that you’ll be able to operate during a crisis?

Start with this question: How much cash do you have now?

Then take the following steps with regard to your sources of cash coming in versus your cash going out.

As you take these steps, it will be helpful to have your most recent bank statement, current account balances and any historical financial documentation on hand. 

Steps:

1. Make a copy of the Google Sheet, “Cash Flow Forecast.”
2. Analyze the example line items. Are there line items you have that aren’t included? Are there line items that you don’t need?
3. Update the line items on the sheets to best fit your business.
4. Insert the amount you have in available cash right now. You can choose to start with weekly or monthly forecasts, whichever you have the best data to project. Weekly may be easier if you have many unknowns.
5. Let’s do “best case scenario” first. Try to use exact amounts (or best estimates) as much as possible.
6. First, focus on cash going out. What are your anticipated expenditures? For each of them, ask yourself: Can we eliminate this expenditure? Can we reduce the amount of this expenditure? Can we defer the payment of this expenditure?
7. Second, focus on sources of cash coming in. What are your anticipated revenues? Which of these might be at risk? Are there any new sources of cash you might experiment with (e.g. reader revenue? Donations? loans?) For each source of cash, ask yourselves: Can we take any steps to increase the amount? Can we take any steps to expedite our receipt of the amount (e.g. foundations might be open to sending you grant money sooner) 
8. Plug in the numbers. See how far out into the future you can go. Or, pick some time frame — i.e. now to September — and use that.
9. What does the data show? Are you still financially viable in one month? Three months? Six months? How close are you to negative cash flow? 
10. Now let’s try “worst case scenario” on the other sheets. 
11. If all or most of your revenue streams dry up, how long can you operate? What are things you can cut (presumably now) to make your business survive longer (i.e. not go negative on cash and even increase cash flow)? 
12. Play around with these figures to help give you a better understanding of the next weeks and months. By having a realistic idea of where your business stands in terms of revenues and expenses, you can make better decisions and prepare for the future by making adjustments earlier rather than later. Remember, you can make as many copies and “scenarios” as you want so you can feel prepared. 

The only thing you should do beyond the steps above is this: Pick some cash on hand number that represents where you’d like to be. Then use the cash tool to make sure you do have that amount at the end of whatever period of time you choose. So, for example, if you choose now to September, and you wish to have, say, $10,000 cash at the end of that time, make sure the numbers you use in best/worst case achieve that.

Created by Tim Griggs and Ryan Tuck.