Professional cash flow forecasts have proven to be one of the most powerful tools in the business owner’s arsenal.  They can illuminate a business’s most successful model and that model’s potential.  How do I know?  Because forecasting saved my neck. 

When I was 27 years old, I owned a retail specialty Ski Store. I was having cash flow problems and didn’t know why. I prepared a business and cash flow forecast of my existing model and then another forecast of a more efficient model. In the more efficient model, I prepared a monthly inventory purchase and payables plan and discovered that my problem was not only over buying inventory but bringing inventory in too early. 

Once I discovered this problem, I quickly liquidated the overstock and managed the inventory to the forecast and my margins, profits and cash flow all improved within 90 days. It was the forecast that drove that success.

The moral of the story: business owners should always forecast!