Ask any business owner what stresses them out the most, and more often than not, the answer is money. Specifically, how to manage money in the business – both cash flow projections and spending.
After all, you need to know how much money is coming in and how much is going out so you can confidently pay your bills.
As an online business manager, I often work with my clients to help them determine how to effectively manage their money, especially their cash flow.
Why? Business owners often find a gap between what their accountant or bookkeeper provides (as they typically focus on the budget and historical data) and what they need to make decisions about their business.
As a business owner, you need both historical data and cash flow numbers to make decisions daily but aren’t 100% sure how to do that. That’s why doing cash flow projections is critical, as it’s often the missing piece of the puzzle in your business.
Before we dive in, let’s define what I mean by cash flow projections: in this case, what I’m referring to is using a combination of historical data, trends, and information to predict what your revenue and expenses will look like in the near future. There’s no magic timeframe here to use but most times I help clients look at the current calendar year and perhaps more. In total, we’re often looking at anywhere from 6-18 months of projected cash flow numbers to help them make decisions about their business.
So, how does it work?
Make Data Driven Decisions with Your Cash Flow Projections
First, consider why doing cash flow projections is essential for your business.
Mapping out cash flow projections helps you understand the numbers your bookkeeper or accountant provides. In my experience, many business owners don’t know how to translate their bookkeeping reports into valuable data.
Doing cash flow projections helps you take the reports and numbers and pull them together with your plans to make better decisions. With that information, you’ll have the information you need to make choices about what is feasible in the business based on facts, not feelings.
For example, let’s say you want a certain profit by the end of the year. However, based on the numbers we’ve discussed, you will not likely hit that goal.
At that point, you could consider these questions:
- Is it reasonable to cut expenses?
- Is it feasible to add more offers to make up the difference?
- Do you need to increase revenue, or are you happy with what this outcome will look like?
Essentially, you’re trying to determine how realistic the outcome you’re trying to accomplish is and what adjustments you need to consider to make it more feasible.
By making data-driven decisions, you can be more rational about what you choose to do within your business.
The Benefit of an Objective Third-Party
The other part of the “why” relates to working with an online business manager like me.
Let’s be honest. Money matters are often fraught with stress and emotion, especially when discussing a business that’s your livelihood.
When we are working on cash flow projections together, I can often be more objective during the process. Yes, I care about the business, but it’s not my baby in the same way as the owner.
My client, the business owner, hands this off for me to wrangle as they usually don’t have the time or interest in figuring these details out… and that’s exactly why they hire me to handle this sort of thing!
I gather all the numbers and objectively make recommendations. I share the pros and cons without any emotion involved. I can tell you that a certain expense is causing an issue without judgement.
All of this information helps my clients determine the best path forward. That may mean pivoting, adjusting expectations, or making decisions about how to use profit.
Whatever they decide, I can then help them use their business operations to get it done.
Quarterly Cash Flow Reviews Help Business Owners Plan for the Future
For the past two years, one of my long-term clients has been pivoting their business in preparation for retirement.
We’ve been working together closely as she has wound down some of her business’s expenses and revenue streams. So, we revisit our cash flow projections every quarter for the coming 12 to 18 months. Right now, we’ve mapped out all of 2024 and 2025 as we know what her long-term goals are.
That said, things change. Regular check-ins at set intervals are necessary to allow my client to stay agile.
A budget shortfall that means a lesser salary draw for them? They can decide whether to make up the difference by adding another offer to generate additional revenue or by cutting some expenses.
Conversely, they may decide they’re perfectly content with the shortfall because they’re happy with the plan, their work-life balance is great, and they don’t want to make any changes.
The bottom line is that they are making an informed decision based on an accurate picture of the business’s situation.
Reduce Stress and Boost Stability With Expert Business Support
By collaborating with a professional who can objectively analyze your data and provide actionable insights, business owners can reduce the stress and uncertainty associated with cash flow projections. Regularly revisiting and updating cash flow projections ensures that financial decisions are based on the most current and accurate information, setting the stage for continued growth and stability.
Remember, knowledge is power, and with well-informed cash flow projections, you can confidently steer your business toward success.
Are you looking for a second brain to help you nail down your cash flow projections and support you with strategic planning for your business?
Working with an online business manager can help. Contact us to discuss your needs and see how working with us can help you uplevel your business.