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At Kerry Lehane & Co we know cash flow is the lifeblood of any business. Even a profitable company can face serious problems if it does not have enough cash available to meet its obligations. Cash flow forecasting is a proactive way to anticipate future financial positions, giving you the time and insight to prevent shortfalls before they become critical.

Why Cash Flow Forecasting Matters
A cash flow forecast allows you to see how money will move in and out of your business over a specific period, often the next three, six or twelve months. By projecting income from sales, expected payments from customers, and planned expenses, you can identify periods where cash reserves may dip too low. This forward view is essential for avoiding late payments to suppliers, missed payroll, or costly emergency borrowing.

Steps to Create an Effective Cash Flow Forecast
Start by reviewing your recent financial data. Look at patterns in your income and expenditure to create realistic projections. Include all expected inflows such as sales, loans, and investment income, and list all outflows including rent, salaries, supplier payments, and tax liabilities. Be conservative in your estimates for income and realistic about expenses, especially if you are facing uncertain market conditions.

Update your forecast regularly. A forecast is only as useful as it is current, so review it monthly and adjust for any changes in sales trends, unexpected expenses, or shifts in customer payment behaviour. Over time, you will develop a more accurate picture of your cash flow cycle.

How to Prevent Shortfalls
If your forecast reveals a potential shortfall, you have options. You might bring forward invoicing, introduce stricter credit control, or offer early payment discounts to customers. Consider delaying non-essential spending or negotiating extended payment terms with suppliers. If needed, secure a short-term line of credit before the problem becomes urgent, as lenders are more likely to approve finance when you are in a stable position.

Diversifying income streams can also provide a buffer. Seasonal businesses, for example, can reduce risk by developing products or services that generate income during quieter months.

Turning Forecasting into a Business Habit
Cash flow forecasting is not a one-off task but an ongoing part of financial management. By making it a regular habit, you will gain the confidence to make informed decisions, invest strategically, and navigate challenges with less stress.

Accurate forecasting will not remove every financial risk, but it will put you in control. The earlier you spot potential gaps, the more options you have to close them, protecting both your cash reserves and your long-term business health.

If you would like to discuss your business needs. Call Kerry Lehane & Co Accountants on 023 8856054 or email info@kerrylehane.com

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