Cash flow forecasting guide: Make more informed business decisions

Financial planning has become a regular exercise for the majority of businesses and their accountants. This enhanced financial scrutiny is a new way of working for some and should remain in place as best practice for the long term. 

To help with this, there are some amazing apps that work seamlessly with Xero to forecast business cash flow. It can be tough to know which solution is right for you. Read on to find out which tools are best suited to your business – and see how these tools work below.

Start with data accuracy 

To generate a clear view of your business’ cash flow, first you need to make sure you’re capturing the right data in Xero.  

There are lots of tools available that capture all the information you need – from bank transactions to expenses and more. 

1. Automatic bank feeds: Bank feeds are one of the greatest innovations in accounting – by setting up feeds from your bank accounts, your transactions are imported automatically into Xero each business day. This makes it easy to keep track of the money coming in and going out, and reduces the time you need to spend manually importing data and reconciling transactions. You can set up multiple feeds from different banks (Xero works with most of the major business banking providers in the UK). 
2. Hubdoc: This nifty tool allows you to easily upload bills, receipts and documents using a desktop, mobile, email or scanning device. The key data is then automatically extracted and synced into Xero. Once bills and receipts are uploaded, the data is matched with your business’ bank feeds and ready for one-click bank reconciliation.
3. Xero Expenses: Xero Expenses enables you to claim and track expenses all in one place. Employees can snap receipts and upload them to Xero in real-time and accurately track and submit mileage on the go. This will help you monitor spending as it happens so you can make fast and informed decisions.

Build a cash flow forecast 

Once you’re capturing all the right data in Xero, you’re in a great position to track your cash flow and build a robust buffer against unforeseen bumps. 

We recently accelerated the launch of two new features in Xero to give you the visibility and insights to do this: 

1. Business snapshot: This new feature is a visual dashboard of key financial metrics showing your business performance at a glance. You can view a range of metrics including income, expenses, average time to get paid and average time to pay suppliers (debtor and creditor days). You can also see your balance sheet and cash balance. Overtime, you’ll be able to identify trends and evaluate where your business is at – including the option to see the impact of COVID-19 on your revenue compared to the same period the previous year.
2. Short-term cash flow: This tool takes all the relevant data from your Xero account – like your bank accounts, bills, invoices – to give you an up-to-date view of your business’ cash flow in one place. Using this data, it projects your bank balance 30 days into the future, showing you the impact of existing bills and invoices if they’re paid on time. With our short-term cash flow tool, you can work out which invoices you should follow up on, and see how your cash flow will change if you pay a bill this week versus next week.

Make the most of cash flow apps 

Historically cash flow was something that businesses viewed a few times a year. But now there are dynamic tools that enable real-time and on-demand insights to help you create a sustainable business.

Xero’s app marketplace houses over 800 app partners and here are four key cash flow app demos to give you a view of how they work:

Futrli

Futrli helps businesses and their accountants understand key financial metrics, manage cash flow and make informed decisions for their business. 

Float

Float is a cash flow forecasting and management app that gives businesses a real-time view of cash flow. This enables you to plan for the what-ifs and make more confident decisions about the future.

Spotlight Reporting

Spotlight Reporting offers a suite of cloud-based tools designed to provide accountants and bookkeepers with an extensive range of reports, dashboards and forecasts that save significant time.

Fluidly

Fluidly is an intelligent cash flow tool for businesses and their accountants, which manages cash coming in, cash going out and everything in between.

Review and repeat 

As circumstances continue to change, we recommend you review your cash flow forecast regularly. For example, if a new lockdown procedure affects how a supplier will get stock to you, this will need to be reflected in your cash flow forecast and profit and loss reports. To ensure that these steps become part of your routine, set aside a few hours every week to go over any relevant updates.

If you’re a business and you want to find out more on how to monitor your cash flow and build a robust forecast, take the Xero Cash Flow Digital Learning Experience. 

If you’re an accountant or bookkeeper, you can check out our dedicated cash flow resource centre for more resources.