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You may think that the phrases “cash is king” or “cash flow is the lifeblood of your business” are often said, but they’re cliches and well-worn reminders for a reason—it’s true and essential.
Think of it this way: have you ever been in a situation where you’re stranded in your car on a 110-degree heat desert road with an empty fuel tank, no water, and a dead cell phone, and your chance of getting to the next city is slim? Unfortunately, that’s what it feels like when you run out of cash. It will be impossible to continue running your business, leading to its bankruptcy.
Therefore, forecasting your cash flow using a reliable tool Moolamore to help you understand where your SME company stands financially and ensure you have enough funds to stay in business is critical.
In this blog post, we will explore more about the wonders of cash flow forecasting by discussing first the common effects of cash flow problems and how embracing cash flow projections empowers you to maintain a sustainable, healthy and lucrative business for the long term.
Perils of Operating Blind To The Future: Effects of Cash Flow Problems In Your Business
Here are the common effects of cash flow problems that can put your business sustainability and growth at risk:
Restricted Flexibility: Negative cash flow leads to poor agility, especially during economic turmoil. This is because sudden changes in operations often require a cash reserve to keep your business thriving even when productivity drops.
Indebtedness: Note that every business must balance its operational costs with paying back its loans. However, a lack of cash flow will force you to choose between one or the other, resulting in increasing your debts and late payment fees.
Reduced marketing budget: You are no stranger to the importance of a marketing budget that can help draw in more customers, but if your business struggles due to poor cash flow, you may need to cut or minimise your costs for marketing. Thus, less marketing could lead to fewer customers and further cash flow issues.
Hamstrung Growth: When you run out of cash in your business, you will have no means to expand your staff, products, premises and customer base or make new investments. Your business will miss a lot of opportunities and instead will suffer from growth slows and reverses.
Insolvency: A worst-case scenario where your cash flow was severely and entirely hurt, and that’s why your business can no longer meet its financial obligations, often leading to a bankruptcy filing.
Employee Morale: Your employees can sense when your business is struggling. Although this can sometimes encourage them to stick together and resolve the situation, it can also result in lower morale, especially when their wages are not paid on time.
Customer/Client Satisfaction: Unhappy employees rarely make the same effort to delight customers/clients. Likewise, lacking extra funds could mean you can’t deliver and maintain the same production efficiency as you once did.
Keep Your Business Alive and Safe For the Long Term: Significance of Forecasting Your Cash Flow (Using The Moolamore App)
Remember that you can’t just wait and see how your ingoings and outgoings fall; cross your fingers and hope for the best. You must pay close attention to your cash flow and make accurate forecasts with Moolamore so you are ready to keep your business at bay from fiscal challenges.
Let’s explore more about the importance of Cash Flow Forecasting:
1) Spot Cash Flow Issues Before They Occur
A cost and time-efficient cash flow tool such as Moolamore allows you to make projections based on real-time data so you can spot any short-term liquidity issues and avoid any potentially damaging long-term effects on the overall financial health of your business.
2) Well-Informed Decision Making
Another great advantage of being able to generate and run various scenarios through your cash flow forecast using Moolamore is that it empowers you to make well-informed critical business decisions.
Suppose you have to choose between hiring additional staff or investing in new equipment, and you aren’t sure which decision will be most profitable for your business in both the short and long term. Forecasting these choices will render you the information you need to decide confidently and gain certainty since you know the impact of these decisions on your cash flow. It gives you knowledge about when and how to allocate your resources properly.
3) Enhance Your Working Capital Management
With an accurate cash flow projection through Moolamore, you’ll be able to know the impact working capital has on your cash position. This way, you can assess and identify if you should focus on minimising it. Hence, minimising your working capital will also minimise your need for cash so you can carry a lower balance or delay future investment activities.
4) Invoicing Improvements
Bear in mind that invoicing is key to the cash coming into your business, and a lack thereof can result in alarming consequences. Whether in timing, quantity or whatever else, forecasting your cash flow using a powerful financial tool, Moolamore, will help showcase where your invoice fails so you can optimise your payment or transaction system (e.g. double down your collection efforts or shorten payment terms in your contracts) and take steps to resolve issues concerning your overall invoicing process.
5) Demonstrate Integrity to Investors & Lenders
Perhaps you’re going in the route of approaching investors or lending institutions; then, you will need to provide evidence of your financial management and business acumen before you can secure additional business funding.
Thankfully, a cash flow management and forecasting tool, Moolamore has a professional but easy-to-interpret dashboard enabling you to build salient financial data (e.g. CFS or cash flow statement)—no need for hassle spreadsheets that are subject to interference and human error.
Furthermore, regular cash flow updates show investors and lenders that you’re attentive towards your financial obligations, instilling a greater level of trust between both parties and ultimately leading to better deals for everyone involved.
You’ve read the perils of operating your business blindly in the future and the significant benefits of knowing your business’s financial standing. So make sure you take the necessary steps to establish a solid cash flow projection with Moolamore to prevent your business from becoming just another statistic that failed due to the neglection of proper cash flow management and forecasting. I hope this blog helps!
Save your business from financial trouble and stay operational—leverage Moolamore now! This top-notch cash flow app prepares you for the future and gives you the power to make informed, proactive decisions regarding investment, debt payment, and business operations. Schedule a demo today!