A cash flow forecast can be structured as a schedule, or calendar of cash receipts and payments, to give you a clear idea of when you expect to have money coming in and going out. Cash receipts would be a function of sales and credit terms, service billings, progress payments on contracts, payments on account, or other sources of income. Cash disbursements would be scheduled based on the due dates on invoices from vendors and contractors, payroll payment dates, tax payment deadlines, due dates on loan installment payments, and other expenditures. By seeing how cash is moving through your business, you are in a better position to anticipate needs and manage cash deficits and surpluses during the period.
Let your vendors help you finance the business
By negotiating payment terms with your vendors (30 days from invoice date, for instance) you will have effectively obtained short-term financing for your operations.
Use inventory management strategies and techniques
How much inventory you need to have on hand will of course depend on your line of business. But inventory carries a cost. It represents resources you have used that have not yet been converted into sales, revenue, and cash receipts. You may be able to produce based on demand, or take advantage of just-in-time deliveries, for example. If these techniques do not result in any detriment to your sales, you will have gained a savings in your cash flow.
Take advantage of prompt payment discounts on purchases
In some types of businesses that involve a significant amount of purchases, it may be possible to take advantage of cash discounts, such as 2% for payment within 10 days, on vendor invoices. The relative advantage of using these discounts would have to be weighed against the inherent financing involved in 30-day payment terms, as mentioned above. And it may be necessary to keep more cash on hand and not make short-term investments of cash surpluses, as mentioned below. But it is an option that should be taken into consideration, and one that may enhance your relationship with key suppliers.