Financial advisors offer several valuable tips for realistic cash flow forecasting. While there are several strategies for financial stability, there are many tips that are universally accepted as being solid financial goals and strategies.
- The first is to be sure to budget for unexpected expenses. Not small incidentals, but huge disasters like floods and fires. This is not an optional expense; you must have a rainy day fund that equals at least two months of operating costs. Reserves are a necessity and are not something you want to be caught without.
- Keep an eye on the economy. Consumer spending changes quickly, and knowing what is selling and what is sitting on the shelves in your market will help you anticipate what people will spend money on and how to make the economy work for you whether it is good or bad.
- Utilize professional consultants. Accountants, as well as cash flow forecasting and cash management professionals will help you to accurately predict your cash flow. These professionals offer unbiased and impartial advice that is also realistic — not allowing you to over- project your expectations.
- Be pessimistic when planning and budgeting. Never assume that one good month means that the sales and profits will continue to climb. You need a full range of months over a period of time to accurately forecast future cash flow.
Forecasting is not an exact science and there are many methods about which to achieve this goal, but, first and foremost, the rule is to understand that no matter how well prepared you are there will always be surprises.