Cash Flow Forecasting is the process of obtaining a projection (or “forecast”) of a company’s future financial position based on the anticipated revenue received and expenses incurred at any given time.
A cash flow forecast model helps you better understand the profitability of your business by:
- tracking all revenue you expect your business to generate on a forward looking basis;
- forcing you to consider the impact of missing or late payments on the profitability of your business;
- incorporating all expenditures of your business;
- providing an educated guess of when exactly your business will cease being profitable.
Its important to note that cash flow forecasting models are not guarantees: they are educated guesses based on the information you know today. That said, a cash flow forecasting model is the foundation to building best-case and worst case financial scenarios for your business.
As B&I Legal Counsel, we act as part-time strategic legal advisors to businesses in Toronto. Our Cash Flow Forecasting Model is a tool we personally use with clients to help our client make important business decisions. These decisions include questions like:
- When will the business run out of revenue to pay its expenses?
- What other opportunities should the business consider to generate more revenue?
- What steps need to be taken to reduce operating costs?
- What performance metrics need to be put in place with employees to ensure they are meeting their financial targets?
- What conditions must be satisfied before the Company makes an important business or investment decision?
Important Note: While our Cash Flow Forecasting Model is easy enough for non-lawyers to use, the Model is intended to be used in conjunction with both legal and financial advice.