In my last post these guys looked really depressed. Now they have their grin back. Why? They completed their first ever Cash-Flow Forecast! And guess what it does not look bad at all.

You might ask: Why are you bothering me with this boring subject?  My answer: The majority of SME’s do not forecast their Cash-Flow.

“82% of businesses fail due to poor cash flow management.”
J Hagen of US Bank

Poor or no Cash-Flow Forecasting remains the no.1 Killer.

Fact is Cash-Flow is the lifeblood of any business — the blood that keeps the business heart pumping.

Positive Cash-Flow does not arrive by chance.

  • You have to work at it.
  • Analyse and control the inflow and outflow of Cash.
  • Monitor Cash-Flow on a monthly basis (minimum!, ideally daily).
  • Ensure you have enough cash to cover your obligations in the coming months.

I always recommend to compile a Cash-Flow Forecast. Is this tricky to do?  Yes, it can be if one wants it to be meaningful.

The weather, the US Dollar, the share market. Forecasting anything is difficult. Never mind how deep you dig or how much analysis one performs, a significant amount of uncertainty and unpredictability remains.

Nevertheless, it is the best ‘Early Alert’ you can use:

  1. CashIn. Review your Revenue and start making realistic predictions for the next 3 to 12 months:
    • Keep in mind that customers do not pay straight away. Allow for delays.
    • Include seasonal variations.
    • Assume the unexpected, e.g. some customers may not pay at all.
    • Limit the net terms to no more than 15 working days.
    • Offer discounts to customers that pay early – sounds counter intuitive but it works!
  2. CashOut. Review costs and start making realistic predictions for the next 3 to 12 months:
    • Wages are fixed and you can easily predict those even if you increase staff.
    • Negotiate extended terms with your suppliers.
    • Purchase stock/inventory just in time.
  • Keep it simple, tailored to Your needs.
  • Spend quality thinking time on this exercise.
  • It may be the difference between business success or failure. Don’t become part of the 82%!

About the Author
Markus specializes in Cash-Flow improvements for SMEs with particular focus on Manufacturing.


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Looks like these guys suffer from Cash-Flow Depression.

When speaking with business owners about their Cash-Flow position I get blank looks or ‘It’s not too bad’. comments.  Wow, that tells the same story all over and over again.

Cash-Flow is not something that is on business owners minds every day – but it should be.

I understand business owners are busy people juggling a lot of tasks.  And looking at the bank balance and/or the Cash-Flow Statement can be depressive.   Yet, keeping any eye on cash flow is somewhat essential I would have thought.  All businesses have to generate positive Cash-Flow sooner or later.

Apparently more than 80% of small and medium sized business struggle with their Cash-Flow.  The lack of positive Cash-Flow is the main reasons that business fail in the first 5 years.

Surprising this is not. It’s not an Einstein equation:  A. Money coming in, minus B. Money going out equals C = money left over (or not).

So, what are the obstacles? I spotted the following, typical episodes:

  • Owners pumping cash into the business. Usually upfront from savings or personal loans. To pay for expenses, capital or marketing.
  • Business gets traction – slowly though. However costs keep coming. Thick, Fast and Relentless.
  • Revenue is generated but barely covers costs.
  • No full night’s sleep arrives, tossing and turning continues.
  • Keeping fingers crossed, Cash-Flow will turn positive – One Day!

Are there any easy solutions?  No.  This Silver Bullet has not been invented.  Setting up and running a business always harbors risks.  What can be done before jumping in the cold pool of Cash-Flow?

I found these 2 Steps help to minimize on-going Cash-Flow problems.

1. Test all activities undertaken if they contribute to (positive) Cash-Flow, for example:

– Online marketing. Check your metrics:  Am I reaching the target audience before I spend big on marketing? Do I need webinars with bells and whistles?

– Engaging support services.  Do I need to hire an expensive accounting firm right away or can it wait? Do I need a fancy website right from the start or the marketing guru that promises a turn-around in only 30 days?

Take no prisoners when checking this!

2. Align all internal processes towards the Cash-Flow target – this could mean sacrificing a pet project or working in uncharted territory (eg “I don’t like all that accounting stuff – I like selling cup cakes!”). Eliminate those activities or processes that add very little or nothing. Focus on the core business processes with a straight line to Cash-Flow.


About the Author
Markus specializes in Cash-Flow improvements for SMEs with particular focus on Manufacturing.






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