| Description | This article describes forecasts on Forwardly. |
| Objective | At the end of this article, you should have a good understanding of forecasts. |
| Estimated reading time | 3-4 minutes |
Cash Flow Forecasting with Forwardly
Cash flow forecasts are one of the easiest ways small businesses can avoid potentially devastating cash flow gaps.
Creating a cash flow forecast manually can be daunting, but with Forwardly, it’s as easy as connecting your first business. Once a business’s data is synced, a one-year forecast is automatically generated by our proprietary algorithms.
As most business owners know, invoice payment terms are often loosely perceived by many clients. Nonetheless, it is vitally important to know when cash will hit a particular bank account so that it can be utilized for payroll, supplies, utilities, rent, and indeed any unexpected expenses that may come up.
The whole purpose of creating a cash flow forecast is to know how much cash is (or will be) available; when money is expected to hit the bank; and if there's enough cash to cover expenses. A cash flow is a planning tool that allows businesses to do away with financing gaps that could leave employees or suppliers high and dry.
What goes into a forecast
A forecast includes information on Accounts Receivable and Accounts Payable; it considers all upcoming debt payments as well as recurring cash inflows and outflows. This can consist of Cost Of Goods Sold (COGS), insurance payments, revenue from recurring clients, payroll, rent, and utilities.
| Reminder: Forwardly is an automated tool that extracts this information directly from the connected business accounting software when creating a cash flow forecast so that the business owner doesn’t have to enter it manually. |
Another thing to consider is real-time information that may not be available; it may be unrealistic to record this information in official accounting books. This kind of real-world insight could include things like the knowledge that a key player may have: for instance, a client may be considering switching to a competitor, or changing a business’s supplier to take advantage of a discounted rate.
Common scenarios
When you’re creating your first forecast, it’s good to start simple. We suggest testing out a few what-if scenarios like a delayed payment, raising an employee’s salary, or purchasing new equipment.
Forwardly offers preset scenarios out of the box that commonly affect small businesses, such as Planning a Loan, Planning a Project, or Financial Modelling.
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Tip: Forwardly lets you add up to three forecasted projections for side-by-side comparison. It is recommended that you make full use of them to get greater insights into different types of scenarios. |