Rolling cashflow forecasts: the benefits for your NZ Business

Are you managing your small business finances based on a static budget? Now may be the time to switch to rolling cashflow forecasting and deeper cash projections.

Having enough cash in the business is an ongoing challenge for many New Zealand small businesses. Cash pressures are increasing as economic conditions become more demanding and operational costs continue to rise.

17% of Kiwi SMEs operate with less than one month of reserves, and around 30% hold between one and three months, according to a recent survey by Prospa. And when cash reserves are this meagre, good cashflow management becomes even more important.

How can rolling cashflow forecasts help?

Income and outgoings are increasingly volatile for many NZ businesses. To mitigate this, it’s sensible to move from using a static annual budget to a 3-month rolling cashflow forecast.

A rolling cashflow forecast projects your incoming revenue and upcoming expenses over a set future period – usually three months. By running regular forecasts, based on your current real-time financial data, you can predict upcoming cash shortages and optimise your spending.

What’s the key strategy behind cashflow forecasts?

The core strategy behind a cashflow forecast is simple: eliminating surprises.

A forecast isn’t a historical scorecard like a profit & loss (P&L) report. And it’s not an idealised wish-list like a budget. It’s a real-time projection that shows you exactly how much cash will hit your bank account – and when it will leave – so you can make decisions before a crisis hits.

How to run a cashflow forecast

There are plenty of cashflow forecasting tools available. Software solutions like Fathom and Spotlight Reporting will integrate with your cloud accounting platform, using your real-time data to create detailed projections and forecasts of your cash position.

However, you can run your cashflow forecasts manually too:

• Set the baseline: Start with your current bank balance.

• Predict inflows: Record when customers will actually pay, not when you invoice.

• Log outflows: Schedule all fixed overheads, variable stock costs and tax dates.

• Calculate closing cash: Use the formula: Opening + Inflows - Outflows. Carry this over as next month's start.

Using forecasting to eliminate the cash surprises

Regular forecasting acts as an early warning system. When you see a projected cash dip coming up, this gives you enough advanced warning to take action and manage your spending.

If you’d like to know more about cashflow forecasting, come and talk to our team. We’ll be happy to explain the best forecasting tools and how to integrate them.