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3 Ways to Use Revenue Forecasting to Even Your Cash Flow

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Knowing when to expect money coming in and how much is going out is basic business accounting, but that doesn't always mean it's the easiest financial aspect to manage. If you deal with too many feast or famine situations with your cash flow, you can put your revenue forecasting to work.

1. Automated invoicing.

Your revenue forecasting shows information about when your client and customer payments should enter into your business cash flow. However, your forecast doesn't account for invoices that aren't sent out in an appropriate amount of time. If your clients don't receive their invoice, they may be uncertain how much they owe you for products or services. Use an automated invoicing system to take care of the problem and smooth out your cash flow when revenue forecasting says you should have plenty in reserve.

2. Focus marketing efforts close to slower seasons.

Your revenue forecasting reveals when you hit particularly slow seasons. You don't want to hunker down and hope that it passes quickly. You need to approach slower seasons head on by focusing marketing and development efforts during this time. Reach out to existing clients to see if there's anything you can do for them during the slow season. Don't wait for them to come to you, go to them a month before your slow time hits. Some clients get so busy they simply don't have the time to get in touch with you for products. Look into other ways to diversify your business offerings to combat slow seasons, such as developing B2B connections if you're primarily a B2C company. Sometimes the lean times provide you with the greatest source of innovation.

3. Plan around major expenses.

Is your revenue forecasting predicting several major expenses, such as an IT roll out requiring a significant investment in training and hardware? Plan your cash flow around it. Adjust payment terms with clients to get paid quicker during this time period, or send out invoices during specific time frames so cash flow exists to take you through the major expense periods.

Hidden Costs of Self-Managed Bookkeeping

References:
http://www.inc.com/encyclopedia/cashflow.html
 
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