How can you use cash flow planning today to make strategic choices

Author : ameliazoe
Publish Date : 2021-09-30 06:03:37
How can you use cash flow planning today to make strategic choices

Here's a true tale, a real-world instance of the recession that was just finished:

In the wake of the recession in 2008, businesses with business plans and solid planning processes were able to adapt to the recession quicker than the competition. Sales dropped suddenly. The businesses with a sound strategy for planning shifted their plans and swiftly changed their costs, expenses, marketing strategies, etc., to adapt to the changes. Companies that did not plan well needed to look into the details of their business amid the crisis to establish and comprehend the connections. With proper planning, the connections are there, so you need to adjust them.

If you have a budget and forecast for your company that helps you plan the flow of cash, now is the perfect time to get into and come up with different scenarios to aid in understanding how changes in sales can affect your cash flow.

If you're not currently using an established forecast, it's fine. It is the ideal moment to make one and then put it to use. There are plenty of free business planning and forecasting documents to help you get to begin. If you're looking to keep spreadsheets out of your life, I suggest trying LivePlan for forecasting and budgeting to streamline the process.

If you have your forecast in place, you will be able to predict the extent to which things could slide and pinpoint the most efficient ways to react:

  1. Find out the burn rate and runway. What speed do you use up your cash reserves? How many days do you have left before you're out of cash?
  2. Review your marketing plans: Are there any marketing programs that need to be cut or eliminated?
  3. Examine payroll: For many companies, payroll is their largest expense. If you have a revised projection, take a look at how changes in payroll can help you stay afloat. You have a few options:
  • Freezing the hiring process
  • Layoffs
  • Reduce all wages by 20 percent
  • Reduce the salaries of leaders
  1. Check all discretionary expenditures, including office supplies, food, and perks for employees. Take a look at all expenses and consider how you can reduce them moving forward.

The advantage of having a strategy is it allows you to swiftly alter the forecast for sales, alter your expenses budget, and then see the effect that this will affect your cash flow in the future. In addition, cash flow forecasts can reveal your weak spots before time so that you can have the time to respond and find solutions.

Don't stress about having all the correct answers when you begin planning your forecast. make your best guess as to what the future sales will be like, and then explore different scenarios with your strategy to make the most informed decision about what costs should be cut and which ones to hold on to.

Make plans for the future and be aware that the crisis won't be a permanent one

Every small business owner in the world is being impacted negatively by a coronavirus. Although this is an economic and health crisis, be assured that it won't last forever and that we're all on the same side. Nobody wants to see companies go under, people out of working or struggling to pay payments. There's a good chance that you'll have support from your vendors and customers.

I can still vividly remember when I was at a crossroads in my own business and needed to go to my suppliers and inform them that the payment would be made more slowly. I realized then that communication and transparency could be the most effective way of getting through in a time of crisis. Sure, they'd like your money, but speaking to your side, with explanations and assurances, is a tenth more effective than silence. If you review your financial statements right now and predicting future scenarios, you'll be able to contact them with a strategy.

If you need clients to settle quicker, be prepared because the market is tightening, and they're likely to be in the same situation. Contact customers, alter the terms of service, give discounts, and keep your relations with them.

Finally, it would help if you considered whether it is time to search for additional working capital. Keep an eye on policies from the government that will help small and medium-sized businesses and entrepreneurs and speak with your bank of choice. Don't be discouraged or get caught up in a panic. There are numerous chances to survive this crisis and emerge better business than you were the one you had before.



Category : business

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