*transcript formatted from original video (watch video for full version)

When it comes to managing cash flow, planning is central.

If you’re coming up short on the cash coming in, what changes do you make to impact that to survive a cash shortage? 

When I talk about planning, I’m not talking about a budget. 

To me a budget is kind of a useless tool. You’re taking an income statement and budgeting out the next 12 months. 

Typically budgeting is more for governmental units and big businesses that have  departmental budgets- so everybody knows how much to spend and what to do to meet that expenditure.

When I talk about planning, I’m talking about forecasting. 

When we forecast, we take the income statement and the balance sheet and forecast it out for the next 12 months to 24 months based on what we know today – on the strategic initiatives we want to implement in our business over the next 12 months. 

And at this point in time the economic crisis- you’re looking at how it’s going to impact your business on a sales volume and a cash flow volume level. 

Use a forecasting tool that allows you to plan on a month to month basis. 

We know now more than ever that the reality for your business can change quickly.  In that event, you have to change your plan. You might need to make some hard decisions in your business to adjust operations for what is forecasted.

When you compare actual results to the planned results you’ll find the most value.

You’ll need to analyze why there are differences and recognize what happened.  Being realistic, and considering the current economic conditions, you can change your operations to hit closer to the targeted plan.

To learn in more detail how planning and forecasting can improve your cashflow, check out our Business Owners Ultimate Guide to Cashflow.  You’ll learn everything you need to know to move your business in the right direction.