Know Your Numbers: Why Forecasting and Cashflow Matter!

Running a business without clear financial insight is like driving with your eyes half closed. You may still be moving forward, but you are constantly reacting rather than confidently steering. This case study highlights why accurate forecasting and cashflow information are essential for sustainable growth and how the right approach can genuinely transform business performance. 

Background

A client approached me to review their accounts and help develop a short-term forecast and cashflow model. The business had reported losses for two consecutive years, and the owner was increasingly concerned about its long-term viability. They felt their previous accountant had not provided the level of support they needed and were unsure whether the business was truly on the right path. 

Despite having operated for some time, the business had never produced management accounts or forecasts. As a result, decisions were largely being made on instinct rather than on timely, reliable financial information. 

This situation is common in many growing businesses there may be profitable activity on paper, but without forward-looking information there is limited visibility over future cashflow and financial risk. 

The Aim: Moving from Reactive to Proactive

The primary aim was to give the business owner clarity, confidence, and control. 

Up-to-date forecasts are critical because they enable business owners to: 

• Understand where the business is heading financially 

• Identify cash shortfalls or surpluses before they arise 

• Make informed decisions with confidence 

• Manage risk proactively rather than reacting to problems 

• Plan for growth while maintaining financial stability 

Most importantly, good forecasting ensures a business can meet its obligations and remain resilient, even during periods of change, uncertainty, or investment. 

The Forecasting Process

Using historical financial information alongside the business owner’s forward strategy, I produced two versions of a forecast and cashflow model: 

• A baseline forecast, reflecting realistic performance based on current trends 

• An upper-level forecast, aligned with growth ambitions and planned strategic improvements 

I then sat down with the business owner and worked through each version in detail, ensuring they clearly understood the current financial position, the assumptions behind the numbers, and the path forward. 

This approach provided vital financial visibility. It also allowed clear, achievable staff targets to be set using the baseline forecast, while providing reassurance that even if the upper-level forecast was achieved, cashflow would remain under control. 

Crucially, the business owner fully bought into the process. We agreed on regular catch-ups to update the forecast each month with actual results. This rolling forecast approach ensures that cash is actively managed and that adjustments can be made quickly when performance or circumstances change. 

The Results

The impact of having accurate, regularly updated forecasts has been significant. 

As a direct result: 

1. It is now on course to achieve a second consecutive year of profit 

2. The team has continued to grow in a controlled and sustainable way 

Overall confidence and decision-making within the business have improved

Final Thought

The business owner had a strong sense of how the business was performing day to day, but they also knew the year-end accounts did not reflect what they were experiencing.

Unfortunately, they did not feel confident challenging what was being presented to them  until they decided to seek a second opinion. 

This experience demonstrated that forecasting and cashflow management are not just accounting exercises; they are essential management tools. Knowing your numbers gives you clarity, control, and confidence. It allows you to plan for the future while keeping a firm grip on cash today. 

Forecasting will not turn your business into an F1 team overnight but it does act like sat nav for your numbers. It helps you see the road ahead, anticipate what is coming, and make informed adjustments along the way. 

If you want to move your business from reactive to proactive, it starts with understanding your forecast and cashflow and reviewing them regularly.