"Entrepreneurs tend to be optimists, so learn how to use the forecasting tools in your accounting software to figure out how much cash is really coming into the business and how much you'll need to pay for planned costs, like new equipment purchases and talent you expect to add. If you don't have the time, ask your accountant to do it for you; it'll be money well spent."
"That's a real risk, he believes. It's wiser to plot out a six- to 12-month forecast of how much cash you expect to have flowing through your business by then. If you're selling T-shirts, that means looking at how many shirts you're likely to sell, what revenue you're likely to produce, and when you'll get it. This will tell you whether you can afford to restock the T-shirts now or if you need to wait a while."
Forecast cash flow six to twelve months ahead to determine whether expected revenue will cover planned costs such as equipment purchases and new hires. Use accounting software or an accountant to build realistic projections based on projected sales and payment timing. Establish a disciplined invoicing routine to accelerate payments and reduce cash shortfalls. Invoice customers frequently and on time to improve cash inflows and bank deposits. Base inventory restocking decisions on forecasted sales, revenue timing and available cash to avoid unnecessary spending while scaling a bootstrapped venture.
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