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Cash flow forecasting for a retail business

Lula - cashflow forecasting
Richard Duffy - Lula Expert contributor
Richard Duffy

Hi, I’m Richard. I’m our Finance Manager at Lula. I’m responsible for our cash flows, cash flow forecasting, expense management and reporting to external stakeholders. I ensure we have enough funds available to keep supporting local SMEs with the funding they require for their businesses.  Here are some insights from my desk

Cash Flow Forecasting

Cash flow forecasting is a crucial aspect of financial planning for any business, but it’s especially important for retail businesses. Retail businesses often have to deal with unpredictable sales and inventory fluctuations, making it essential to have a clear understanding of your cash flow situation.

Cash flow forecasting is the process of predicting how much money a business will have on hand at any given time, based on expected inflows and outflows. It’s a tool that helps businesses stay on top of their financial obligations and make informed decisions about future investments and expenses.

Value of Forecasting

Cash flow forecasting is important for retail businesses for several reasons:

  1. Helps you plan ahead: Cash flow forecasting allows you to anticipate future cash shortages or surpluses, so you can plan accordingly. You can plan for seasonal variations, budget for unexpected expenses, and avoid cash flow problems.
  2. Helps you manage your cash: By forecasting your cash flow, you can manage your cash more effectively. You can make sure you have enough money to cover your bills, pay your employees, and invest in your business when necessary.
  3. Helps you make better decisions: With a clear understanding of your cash flow situation, you can make informed decisions about investing in new products, expanding your business, or taking out a merchant cash advance.

Tips for Forecasting

Here are some tips to help you with cash flow forecasting:

  1. Start with your historical data: Your historical data is an excellent starting point for cash flow forecasting. Look at your sales and expenses from the previous year, and use that information to create a baseline forecast.
  2. Account for seasonal variations: Retail businesses often have seasonal fluctuations in sales, so it’s important to account for this in your forecast. Look at your historical data to identify patterns in sales and expenses, and use this information to adjust your forecast accordingly.
  3. Plan for unexpected expenses: Unexpected expenses can quickly derail your cash flow forecast. To avoid this, it’s important to plan for unexpected expenses, such as equipment repairs, inventory shortages, or marketing campaigns.
  4. Monitor your cash flow regularly: Cash flow forecasting is not a one-time event. It’s important to monitor your cash flow regularly to ensure that you’re on track. If you notice any issues, you can take corrective action before they become a problem.

Business Cash Advance

If you need funding for your retail business, a business cash advance may be an option to consider. A business cash advance is a type of financing that provides you with a lump sum of money in exchange for a percentage of your future sales.

Before taking out a merchant cash advance, it’s important to consider the impact it will have on your cash flow. You’ll need to factor in the repayment schedule and the percentage of your sales that will go towards repayment.

Final Thoughts

Cash flow forecasting is essential for retail businesses that want to stay on top of their finances and make informed decisions about the future. By following these tips, you can create a more accurate forecast and avoid cash flow problems. If you need funding, a business cash advance may be an option to consider, but it’s important to carefully consider the impact on your cash flow before making a decision.

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