By Myranda Mondry and Harriet Phimster

Do you know precisely how much cash is moving in and out of your business each month? If not, that could be a problem. Keeping a regular, detailed cash flow forecast is crucial for business survival.

What is a cash flow forecast?

A cash flow forecast predicts exactly when and how much cash is going to enter and leave your business over time, allowing you to prepare for cash crunches and surpluses.

An accurate, updated cash flow forecast can provide you with a useful snapshot of the health of your business, which you can use to make informed business decisions and start accurately predicting the future health of your business.

Why industry companies struggle with cash flow

Slim margins

Businesses within the restoration and cleaning industry operate on extremely slim margins. More often than not, companies must perform a job costing analysis — or determine the total costs of the job — before doing the actual work, and failing to stay within those parameters could jeopardize the profitability of the job.

Inaccurate estimates

Job estimates must include a very detailed cost breakdown — containing every item needed to complete the job — all before the job begins. When items cost more than expected, even by just a few dollars, it cuts into your profit margin.

Unreliable tracking

When cleaning and restoration companies stay within margins, they can be very profitable. But if you’re not tracking those margins correctly, you’re more likely to go over budget and finish a job with a smaller profit margin than you had hoped for. Or worse, none at all.

How cash flow can help you stay profitable

1. Know how future projects will affect your bank balance

Working on a project-by-project basis means cash flow can be unpredictable. By building a cash flow forecast, you’ll be much more able to understand how cash is coming in and going out of your business. You’ll also have a better picture of whether you need to push for another job next month or if you can afford to make an investment like hiring a new employee.

But you can’t build an accurate cash flow forecast until you have a solid understanding of the previous peak season’s outcome. Did you spend too much on labor or materials on jobs that should have been a slam dunk? Did you experience high turnover? Did you have the necessary equipment, and did your employees have the necessary industry training to help them efficiently and effectively finish the job? Knowing the answers to these questions will help you build a more accurate forecast for the future.

2. Scenario plan for an over-budget project

It’s vital that cleaning and restoration projects stay within budget, but things don’t always go according to plan. Scenario planning will help you work out what happens if you go over budget, lose a contract, or experience any number of possible future situations. This enables you to have contingency plans in place should you have a shortage or surplus of cash in the future.

3. See upcoming cash gaps, and take action

One of the most important benefits of cash flow forecasting is getting a picture of what your bank balance will look like in the future. Even if you expect a payment by the end of the month and your company looks healthy on your profit and loss statement, the cash view can tell a very different story.

You might be going into the red for a few days next month, which could mean you can’t afford to pay your suppliers or, every business owner’s nightmare, make payroll. Seeing what’s going to happen day by day in the near future will alert you when you need to take action.

4. See whether you can afford to reinvest or take drawings

A robust cash flow forecast is integral for growing your business as it tells you when you can afford to safely reinvest in your earnings. Your business might be doing well enough for you to take some drawings or give out bonuses. With a cash flow forecast, you can scenario plan for this eventuality and see how it will affect your cash.

5. Make sure you can meet your financial obligations

Paying your suppliers and bills on time and in full will boost your company’s reputation. Similarly, if you constantly pay late, you’ll find suppliers and other providers are less willing to work with you.

Of course, paying your suppliers hinges on getting paid in a timely manner for the jobs you complete. Unfortunately, when it comes to getting paid on large losses, insurance companies have to include the owner’s mortgage lenders on the check as a payee — and it can be hard to get those mortgage lenders to endorse the check.

It adds another point of review for an already tight estimate, sometimes resulting in a lower estimate than you had hoped for. The process alone can take several months, delaying your timeline of getting paid for work and expenses.

Forecasting how much cash you will have in the bank will help you understand whether you can afford to pay on time or need to manage expectations. By making timely payments, you’ll safeguard your reputation and even bank a few favors to call in.

6. See the impact of late payers, and improve credit control

Keeping up a regular cash flow forecast can help you stay on top of your credit control. By doing a cash flow forecast that factors invoices you’re owed and bills you need to pay, you’ll more easily identify if anyone consistently pays late, which improves your credit control process. You can even model different payment dates on overdue invoices to see the true impact of late payments on your cash balance.


Myranda Mondry is a copywriter and researcher at TSheets — an employee time tracking and scheduling software that’s used by more than 20,000 successful businesses worldwide. Based in the up-and-coming tech community of Boise, Idaho, she has a journalism degree from Boise State University and a serious passion for helping small businesses succeed. In her spare time, she can usually be found curled up with a good book or out hiking Boise’s famous foothills.

Harriet Phimster is a member of the marketing team for Float Cash Flow Forecasting, an app for QuickBooks Online and Xero, based in the UK.