Rethinking Your Cash Flow Forecasting To Attract Funders

One key aspect of an innovative business model is its ability to survive in diverse economic climates. If you're looking for funding to see you through difficult times, cash flow forecasting is a vital technique. Having poor quality cash flow forecasts and information makes it difficult to communicate with investors. What can you do to rethink your cash flow forecasting ability? 

Explaining The Business Model Clearly

Lenders or investors have to understand your business model. This implies they need to become cognizant with regards to any issues that affect income over a certain time and impacts trading conditions. The cash flow forecast will need to have specific details, such as income streams, burn rate, and what sort of investment is needed to get back to an even keel. Having access to high-quality accounting software can also help deliver better insights. Rather than simply highlighting expected costs, using a forecast to identify key information will highlight to investors and lenders when these costs will be incurred. 

Not Addressing Changing Business Risks

The cost of recent events has emphasized the fact that no business environment is safe. You need to show you have considered all the risk factors that could hinder your future performance. For example, have you made a stringent check on cash flow timeframes? Have you altered the business model to reduce the risk of dependency on international suppliers? What would be the impact of an increase in supplier costs? These different scenarios can be highly effective in identifying how cash flow can change under different scenarios. 

Documenting Your Business Assumptions

To an extent, every forecast relies on assumptions. When you consider the cost of your sales, growth opportunities, and any future sales, these assumptions should be set out, and they should be justified.

Ensuring Management Packs Are Fit For Purpose

 A management information pack will highlight how your business is performing against financial forecasts. It will also work to communicate how resilient and diligent management is during tough times. When you start to get the ball rolling and identify any weaknesses and how business actions can be corrected, you can facilitate robust discussions to fix issues, either by incorporating additional technology or learning to automate and streamline tasks such as the creation of weekly reports. 

The Importance Of Presenting Information Well

It's important to present information in a digestible format. You should never mix your messaging, which is why it's so important to focus on KPIs, rather than varying the message in a slew of charts and graphs. KPIs are essential to survival, and they can act as a warning sign if the business is not progressing.