Finance and legal
The financial and legal aspects of running a business are often some of the most confusing. We'll try to make it easier.
Cash Flow Forecasts
Every business should have a cash flow forecast so that it can project the amount of money coming into the business (inflow) and the amount of money leaving the business (outflow). Your cash flow will help you to identify peaks and troughs in your finances. Used effectively it is a valuable tool for your business. A cash flow forecast usually covers a 12 month period for smaller businesses, larger businesses may need to produce one for three or even five years.
The cash flow forecast should relate to the actual money that is due to be collected in and paid out in each period, not to the month when an invoice is raised or bill received (a sales forecast will contain this information and can be used to create the cash flow forecast).
Cash flow forecasts are often produced on a month by month basis, but you may find that a shorter period is of benefit when tighter financial control is needed, in fact some businesses operate these controls on a day by day basis during difficult periods.