Mr. Micawber, in Charles Dickens’ David Copperfield, said: ’Annual income twenty pounds, annual expenditure nineteen and sixpence, result happiness. Annual income twenty pounds, annual expenditure twenty pounds and sixpence, result misery’. 
Despite the fact that we all know this to be true, an absurd number of small businesses try to manage without any effective form of cashflow forecasting in place. And in truth, the quote is not as obvious as it seems…

It is perfectly possible, even if your annual income exceeds your annual expenditure, to experience severe problems. 

If cash is slow in coming in, and bills fall overdue and must be paid, a nasty overdraft can develop very quickly indeed. If you don’t have a cashflow forecast in place, how do you know as and when the problem is likely to resolve?

A simple cashflow, updated regularly, means you can predict ups and downs of both income and expenditure, and know your likely bank balance at any given point in the next 12 months. If you do see that you will be short of money, or requiring an overdraft, or an extension of existing overdraft, you can go to the bank and make a lucid argument for the extra borrowing.

If you see a surplus arising, you can see whether it’s safe to spend or whether you need to salt away what is really just a high point in overall cashflow.

Keeping positive cashflow is one of the key skills in surviving as a small business.


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Meanwhile, best wishes – I look forward to your suggestions.