Well, it's far from an exact science, but the good news is that you can use cashflow forecasts to assess trends and take better control over your business.
Predicting Your Expenses
This is the simplest part of cashflow forecasting because you already know many of your historical expenses (wages, office rental, etc.).
You should use your historical expense figures in combination with already earmarked promotional and business expenses for the future to determine your average monthly overhead.
You will find that even bills that can fluctuate on a monthly basis, such as telephone bills or office supplies, have a monthly average.
There will be other, one off expenses that you will need to set money aside for - such as an exhibition or yearly insurance bills. Set aside enough money each month to cover these expenses when they arises. For example, an exhibition costs £5,000, put aside £416.66 each month to be sure you can afford it next year as well.
When you have calculated all the relevant expenses and come up with your monthly average, you now have your break even point. This is the absolute minimum monthly amount you will require to break even every month in your business.
Knowing this can help focus your mind on what you need to do to ensure that this minimum is met each and every month. Just knowing precisely what your goals are will benefit your business.
Predicting Your Income
Predicting your company's income is, unfortunately, a lot more tricky than predicting your expenses. It is, of course, even more difficult if your business is brand new or if you are launching a new product.
However, you do have enough data to make reasonably accurate predictions on an 'average monthly' basis and anyway, these predictions can be refined every week or every two weeks based on additional information you have gained.
The first step is to review your sales and marketing process. Look at the data you have for the number of phone calls you make each month or the number of visitors you get to your website and work out how many convert into new customers or clients.
Secondly, look at the value of each new client or customer. Work out the average lifetime value of each customer based on the information you have or - if you are product based business - the average value of a sale.
Now, you can start to put together forward looking income predictions based on the average number of new customers gained per month and the average value of those customers.
Additional factors will have to be included, of course. The most essential of these is how long it takes to get the money from your clients.
Also if you have a business that retains clients month after month and has recurring income from those clients, you will need to look at those average monthly values plus the drop out rate of current clients.
Once you have all these variables in play, you can start to predict monthly, quarterly, even yearly income.
Test, Revise and Test Again
Every month, or every week, if you would prefer, you can revise these numbers and test your predictions against real information. If a downturn does start to occur, you will be in a better position to do something about it - may be by making more phone calls or increasing targeted advertising.
One thing is certain, if you remain on top of these numbers, you will be able grow your business more successfully in the medium and long term.
The real estate market is coming off a 25 year boom cycle and has faced a terrible correction in the past two years. Once fantastic markets such as California, Florida and now even New York city are correcting drastically. In light of the drastic correction, many investors and homeowners are upside down in their mortgage and face tough choices of walking away from their homes or facing negative cash flow or even foreclosure. We provide some strategies to stop foreclosure and maximize your investment.
In this article we address three key questions, what does the future hold for real estate, how can investors maximize their investment and for investors stuck in negative cash flow and negative equity, what is the most effective solution.
It is quite clear at this point that sales are drying up in once hot markets. Further more, prices are down roughly 15-25% on average. Normally coming off a 20 year bull market this would not be a significant story. But home equity loans represented roughly 50% of the disposable personal spending of households over the past five years.
The long bull market in housing, where housing did not correct even in the bear market of 2000, led many to believe that housing prices would continue to rise forever. Unfortunately, this belief that the home or investment property would continually generate income and gains has now been proven to be a drastically faulty forecast.
While prices are falling, most investors and homeowners have seen their equity in their homes and properties wiped out. If you were amongst the unfortunate few that took out a home equity loan or bought a house in the past 3 years, you are faced with the very real possibility that the equity on the loan is wiped out while only the loan remains.
Americans – on average - have now all become renters. The reason is simple, we’re all making payments on the bank’s loan with very limited visibility on when the market will recover. We will briefly go over the reasons for our bearish view. Oil is over $100 a barrel, inflation in commodities is rising alarmingly, home inventories are at record highs, the consumer’s net worth is being wiped out, spending and consumer confidence are plummeting, the national debt is worse than ever, the dollar is weak etc etc. The most effective tool that the Fed has, interest rate reductions, has been ineffective in reducing the cost of borrowing due to the subprime meltdown and the credit bubble. This being the case, it has become difficult to create the conditions for investment and eventual recovery.
Needless to say, the psyche has changed and it could be at least two years before we see a noticeable return to normalcy in real estate and investment properties.
If you’re an investor, especially one that purchased in the past 2 or 3 years, you’re likely facing a negative equity and negative cash flow situation. Even investors that purchased thinking they were buying positive or breakeven cash flow property are in negative cash flow situations because of the rapid rise in insurance costs, taxes and other unforeseen expenses, including the very high cost of financing.
If you’re a homeowner, you may well be facing a similar negative equity situation, with a home equity loan but no equity.
One of the ideas that many of you are floating in your minds and wishing you could do is to just walk away from the properties. But you’re concerned about the financial ramifications. Well, it is far better to examine the alternatives than to do nothing.
We’re hearing through our attorney contacts that banks are far more willing to negotiate writedowns once you start the process. For many of you, that is not an attractive option and you just want out of the property. Again, there are strategies that businesses pursue all the time that are essentially reorganizations of debt. And we have qualified attorneys that we can refer you to that will assist you in doing a partial reorganization.
Many of our investors and homeowners are also in financial difficulty and many of these clients have been able to buy time by fighting a foreclosure filing while simultaneously organizing a bankruptcy reorganization. The key question is the hit to your credit. However, for families facing dire financial situations, the credit rating should not be their sole primary concern.
If you are interested in possible exit strategies, then the time for action is Now while you still have options. The worst feeling in the world is letting someone else decide your fate. Our attorney resources are there to help you. Business is booming so they don’t need to spin you any tales nor do they need the money. They will offer you frank objective advice and create a strategy for you that will buy you time, create a plan for reorganization or just inform you of your options. There is no pressure and the consultation is free.
Both Jim Haines & Ken Wilson are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.
Jim Haines has sinced written about articles on various topics from Partnerships, Finances and Certified Public Accountants. Jim Haines works for Just Accountants, the website where UK companies can find suitable . He also writes his own. Jim Haines's top article generates over 3600 views. to your Favourites.
Ken Wilson has sinced written about articles on various topics from Software, Cars and Shopping. Get a Free consultation with a qualified in your area. Let us provide you with all the advice you need to formulate an effective. Ken Wilson's top article generates over 45500000 views. to your Favourites.