Financial Resilience - 2 tools every business should have

Cashflow forecasting is the process of predicting a company's future cash inflows and outflows. This helps businesses to identify potential cash shortages and surpluses and to make adjustments to their spending and investment plans accordingly. By having a clear understanding of their future cash position, businesses are able to proactively manage their finances and avoid unexpected cashflow problems.

Budgeting, on the other hand, is the process of allocating resources to specific activities and projects based on business priorities. A well-prepared budget provides businesses with a roadmap for their financial goals and helps to keep them on track throughout the year.

Both cashflow forecasting and budgeting can help businesses to become more resilient in the following ways:

Improved Financial Planning: By forecasting future cashflow and creating a budget, businesses can plan for their financial future more effectively. They can identify areas where they can save money, allocate resources more efficiently, and ensure that they have the funds they need to meet their financial obligations.

Better Cash Management: Cashflow forecasting and budgeting help businesses to identify potential cashflow issues and to take action to manage their cash more effectively. This can include reducing unnecessary expenses, negotiating better payment terms with suppliers, and finding new sources of funding.

Increased Confidence: Having a clear understanding of their future cash position and financial goals gives businesses greater confidence in their ability to manage their finances. This can help them to make better decisions, be more proactive in managing their finances, and avoid unexpected financial difficulties.

Reduced Risk: Cashflow forecasting and budgeting help businesses to identify potential financial risks and to take action to mitigate those risks. By proactively managing their finances, businesses can reduce their exposure to financial risk and increase their resilience in the face of unexpected financial challenges.

The year ahead will have significant challenges. Some of these will present themselves as risks, and others as opportunities. The ability to tackle either of these requires business resilience.