You can’t understand why there is never enough cash in the bank. You owe money everywhere you look and can’t see a way out. Yet your accountant tells you your business is profitable and you can see that you are making a profit but where is the cash? Why is the bank account empty?
You keep thinking you’re almost on top of it but then the next phone call arrives or the next tax return is due and the confusion sets in again. You can’t see where you’re going to get the money from. It wouldn’t be so bad if you had no sales but your gut keeps telling you that you have a good business here. It’s just so confusing and so hard to know what to do.
When cash is tight it can put you under enormous pressure. It does really feel like you are dodging boulders falling from the sky. You feel the pressure in your body, you probably can’t remember the last time you had a good nights sleep.
The tighter the cash flow the more time you have to spend managing it. Just when you need to be concentrating on keeping the sales coming and controlling costs as much as possible you may have to spend hours a day working out your cashflow.
And when cash is tight you need to get everything down to the last cent almost. You need to have your accounts up to date all the time. You need to be chasing people who owe you money and holding off people who you owe money to.
And the thing about cashflow forecasting is that it is half art and half science. You need someone who has a feel for the business. It is not a matter of just having a spreadsheet and then you are set. You are constantly adjusting the spreadsheet not only according to what is due but also according to what you expect to get from what is due. Intuition plays a big role in cashflow forecasting.
Cashflow forecasting, like any sort of forecasting, involves a crystal ball because you are trying to predict the future.