Cash Flow Forecasting

Matrix Key:  Financial Viability - Profitability - Projections and Plans

“Cash Is King.”

Few components of the WholeLife Matrix carry as much weight as profitability.  For many people, profit has negative connotations.  But without profit, you don't have a business. Cash flow forecasting is essential to the success of every business, and should include the following:

1. A schedule of receipts and disbursements
2. Liquidity measurements
3. “What if” scenarios
4. Accounts Receivable to Cash projections

Here’s the bottom line…if your business runs out of cash, you are out of business.  You need cash to pay vendors.  If you don’t pay them, they will stop selling to you.  You need cash to pay employees.  Few employees are willing to volunteer their time.  You need cash to pay off debt.  Banks are picky about being re-paid.  Cash is King.

You must monitor your cash flow at all times.  How quickly will your Accounts Receivable convert to cash?  What if your customers pay you three months late?  What is your percentage of cash to inventory?  A close look into all of these questions is worth your time and effort.  A little planning now will keep the wolf from the door later and will keep you on a winning path.

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Biggest Money Mistakes Series

"Champions keep playing until they get it right." - Billie Jean King, American Tennis Champion

Many people have gone from broke to multi-millionaire by following some simple concepts that allow anyone to move from debt to wealth, on any income. One thing you will note about money mistakes; they deal more about attitudes, beliefs and values, versus failing to review a restaurant receipt for errors.

1. There is no reason to track my cash spending because it doesn’t add up to enough money.
People have the attitude that only large amounts of money are important and that small amounts of money are not. They will not be concerned about how invest a few hundred dollars, but only thousands of dollars. They will think nothing of spending $5 a pack of cigarettes or a cup of coffee and muffin at Starbucks when they can make the same things at home for 50 cents. The fallacy is you can’t get to the large amounts of money to invest if you spend all the small amounts. You must have respect for the small amounts too. Over a 30-year time frame, $5 per day can create a $1,000,000 portfolio when invested appropriately.

Solution: Use a small notebook or spending register to track all cash spending. You cannot create a change in your behavior you are unaware of it. Create awareness by tracking your cash spending. Track everything from 25 cents in the parking meter to a fancy dinner and tip.


Rennie Gabriel – Rennie@RennieGabriel.com
Author of Wealth on Any Income: 12 Steps to Freedom