By Matthew A. Scott, MBA, CMA, CFE

Most small businesses either do not prepare any formal cash flow projections, or they are not happy with the value they get from their projections.  A critical step to preparing a reliable cash flow projection is to focus on sales projections.  Since sales are the necessary first step in the cash flow generation process, it is important to put the time and focus into this step to ensure you have the most accurate projection of sales you can to start the process.  Over or under estimating sales can have significant impacts on your cash flow projections.

The next item that many small businesses overlook is the need to project your balance sheet.  Banks rely on, and want to see, what your balance sheet will look like based on the execution of your business plan.  Banks will take you a lot more seriously if your financial statement projections are backed up by what your business plan tells them. 

Lastly, be conservative in your estimates.  As you are building your projections do not assume a 'best case' scenario for every input, especially if you are sharing your projections with banks.  Build a projection that can allow you to under-promise and over-deliver.  This will set the tone that your projections are strong and reliable and allow you to better plan your cash resources and requirements.  Significantly under-estimating or significantly over-estimating your cash flows both show that you do not fully understand your business.  An accurate and reliable forecast also gives the banks a reason to choose your business for the loans they have to offer over those opportunities that demonstrate more risk by consistently missing their forecasts. 

A B2B CFO^® will help you put together a cash flow projection that will allow you to better understand your business’s needs and plan for your cash flow requirements and investment opportunities.  Every company, regardless of size, needs a Chief Financial Officer (CFO). The best CFOs keep an eye on the whole company, not just the bottom line.  We are problem solvers!

As a B2B CFO^® partner, my job is supporting a client's entire organization including Sales, Marketing, Production, Operations, Staffing, and other relationships--internal and external. If you would like to learn more about my services or would like to talk about a particular aspect of your business in greater depth, please give me a call at (720) 663-9397 or e-mail me at MatthewScott@b2bcfo.com.