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How to Build a 90-Day Cash Flow Forecast for Your Business · Profit Points Podcast

• 0:00
  SPEAKER_00: Hey, glad you're here.
• 0:01
  SPEAKER_00: This is Profit Points, and I'm Megan Schwant, your accounting sidekick and certified Profit First Professional in Fix the Snex Advisor.
• 0:09
  SPEAKER_00: If you're a small business owner who wants to actually understand what is happening in your business financially, not just survive it, but genuinely get it, you're in the right place.
• 0:20
  SPEAKER_00: Every episode covers one concept, uses real numbers, and ends with something you can actually do.
• 0:26
  SPEAKER_00: That's the deal.
• 0:27
  SPEAKER_00: Let's talk about today's topic.
• 0:31
  SPEAKER_00: I want to tell you about a scenario that plays out in small businesses more often than anyone talks about publicly.
• 0:38
  SPEAKER_00: A business owner has her best revenue quarter ever.
• 0:42
  SPEAKER_00: The work is good, the clients are happy, the profit margin looks healthy on paper.
• 0:48
  SPEAKER_00: She is feeling genuinely confident about where things are headed.
• 0:53
  SPEAKER_00: And then she cannot make payroll.
• 0:55
  SPEAKER_00: Not because the business is failing, not because she made a terrible decision, because the money she is owed has not arrived yet.
• 1:05
  SPEAKER_00: And the money she owes is due right now.
• 1:09
  SPEAKER_00: This is not a profit problem.
• 1:12
  SPEAKER_00: This is a cash flow problem.
• 1:14
  SPEAKER_00: And the two things are not the same.
• 1:16
  SPEAKER_00: Today I'm going to show you the tool that makes sure you never find yourself in that position.
• 1:22
  SPEAKER_00: And I promise it is simpler than you think.
• 1:25
  SPEAKER_00: I'm Megan Schwan, your accounting sidekick.
• 1:28
  SPEAKER_00: This is Profit Points, where we make sure a profitable business actually feels profitable.
• 1:34
  SPEAKER_00: Let's build your cash flow forecast.
• 1:37
  SPEAKER_00: Most business owners manage their finances by looking backwards.
• 1:42
  SPEAKER_00: The PL tells them what happened last month.
• 1:45
  SPEAKER_00: The bank balance tells them what is there right now.
• 1:50
  SPEAKER_00: And decisions get made based on those two backward-looking snapshots.
• 1:54
  SPEAKER_00: The problem is that neither of them tells you what is coming.
• 1:58
  SPEAKER_00: Your PL does not know that your biggest client pays on 60-day terms.
• 2:04
  SPEAKER_00: And you have a large contractor invoice due in three weeks.
• 2:08
  SPEAKER_00: Your bank balance does not know that August is historically your slowest month, and your fixed cost do not care about that.
• 2:17
  SPEAKER_00: Both documents are telling you the truth, your PL and your balance state with your cash balance, but only about what has already happened.
• 2:27
  SPEAKER_00: And running a business entirely on what has already happened is a little like driving by looking exclusively in your rear rear mirror.
• 2:36
  SPEAKER_00: And unless you are super skilled, like those people that can do that, which is not me, that is not the way to go.
• 2:46
  SPEAKER_00: Cash flow forecasting is the windshield.
• 2:49
  SPEAKER_00: It shows you what is ahead, specifically the timing of money coming in and money going out, so that you can navigate toward it rather than react to it when it arrives.
• 3:01
  SPEAKER_00: So today's profit point that we're going to walk through today is the 90-day cash flow forecast.
• 3:08
  SPEAKER_00: A cash flow forecast is simpler than it sounds because you've probably heard that term and are like, what do I even do with this?
• 3:16
  SPEAKER_00: At its core, it is just a prediction, a structured, honest look at what money you expect to receive and what money you expect to pay out over the next 90 days, are by week or month to month.
• 3:31
  SPEAKER_00: You are tracking three things: what is coming in, such as client payments, recurring revenue, any one-time income you are expecting, and then what is going out.
• 3:40
  SPEAKER_00: Things like rent, payroll, contractor fees, software subscriptions, tax payments, loan repayments, anything basically that's leaving your account.
• 3:49
  SPEAKER_00: And then the net position after each period, what those two numbers combine kind of leave you with.
• 4:00
  SPEAKER_00: And that's tracked across 13 weeks.
• 4:03
  SPEAKER_00: Now tell me why this changes everything.
• 4:07
  SPEAKER_00: Well, let me tell you.
• 4:09
  SPEAKER_00: And I want to use an analogy here because I think it will make it click in a way that mechanics alone do not, especially because we're using all of this jargon and all of this imagery.
• 4:21
  SPEAKER_00: So imagine you are planning a road trip from your house to a destination that's about 12 hours away.
• 4:27
  SPEAKER_00: Anyone ever did that?
• 4:28
  SPEAKER_00: I've actually driven to and from Wisconsin to Florida, I don't even know how many times, many, many times in the last eight years.
• 4:38
  SPEAKER_00: You know, roughly, but, anyways, if you are driving 12 hours, you know roughly how much gas your car holds and approximately how far it gets per tank.
• 4:47
  SPEAKER_00: If you plan ahead, you can take a look at the map and identify where the gas stations are limited and make sure you fill up before that long empty stretch happens, rather than realizing you are running low in the middle of it with no station in sight.
• 5:01
  SPEAKER_00: That's only happened to me one time.
• 5:04
  SPEAKER_00: This is exactly what a casual forecast does for your business.
• 5:08
  SPEAKER_00: Those long empty stretches in your slow month, or sometimes even in your year, the one that comes every August or every January after the holiday spending freeze, or every summer when your service-based clients go quiet.
• 5:23
  SPEAKER_00: Anybody feel that?
• 5:24
  SPEAKER_00: You know it's coming.
• 5:25
  SPEAKER_00: So the forecast shows you where the sparse patch is on that map.
• 5:30
  SPEAKER_00: So you can fill up, quote unquote, build the reserve, close a client, defer an expense before you are sitting on the side of the road wondering, how did this happen?
• 5:42
  SPEAKER_00: The business owner who does not have a forecast hits that stretch and then panics.
• 5:47
  SPEAKER_00: The business owner, which is gonna be you, who does hit it and executes the plan that you made two months earlier, still has options.
• 5:58
  SPEAKER_00: If we were to look at actual numbers, this is how readable this method is.
• 6:03
  SPEAKER_00: So let's say that your forecast to show is three months.
• 6:06
  SPEAKER_00: We're talking about 90 days.
• 6:08
  SPEAKER_00: So let's say July has inflows of 16,000, outflows of 13,200, that your net position ends up being plus two 2800.
• 6:19
  SPEAKER_00: That's the difference between those two numbers.
• 6:21
  SPEAKER_00: More money came in than left.
• 6:23
  SPEAKER_00: Simple enough, right?
• 6:25
  SPEAKER_00: August, same thing, inflows of 11,000.
• 6:28
  SPEAKER_00: This is historically your slow month, and you're predicting outflows of still 13,200 because a lot of your expenses are going to be the same.
• 6:38
  SPEAKER_00: This puts your net position at minus 2200.
• 6:42
  SPEAKER_00: If you're keeping up, that puts us at$600 positive so far.
• 6:46
  SPEAKER_00: And then we hit September inflows of$18,000 as things pick back up, and then the outflows of$13,200, which puts the net position of plus$4,800.
• 6:58
  SPEAKER_00: That August dip is not a surprise anymore because you knew it was happening.
• 7:02
  SPEAKER_00: You laid out your numbers and the things that you could predict.
• 7:06
  SPEAKER_00: You are looking at it in July and you have two months of runway to respond.
• 7:11
  SPEAKER_00: You can move a portion of the July surplus into a reserve to cover the August shortfall.
• 7:18
  SPEAKER_00: Or if you don't want to do all of this, you can also implement profit first because that's something that automatically happens when you do that.
• 7:25
  SPEAKER_00: But I digress, another conversation for another day.
• 7:28
  SPEAKER_00: You can bump up Legion as another way and reach out to a few warm leads in July with a goal of closing at least one before August hits to kind of balance that out as well.
• 7:39
  SPEAKER_00: You can identify non-essential expenses that can maybe be pushed back or paused a few months.
• 7:45
  SPEAKER_00: A lot of subscriptions allow for that.
• 7:47
  SPEAKER_00: Might be a really great way to kind of defer some of those expenses or put it off.
• 7:52
  SPEAKER_00: And you can delay that into the next into September when things pick up again.
• 7:57
  SPEAKER_00: None of these responses require a crisis, none of them require a panic phone call to your accountant.
• 8:03
  SPEAKER_00: They require your awareness, and the 90-day forecast is what creates that awareness in advance rather than in the middle of the problem.
• 8:12
  SPEAKER_00: These numbers don't change.
• 8:14
  SPEAKER_00: Typically, you can predict it either by historical indicators or what you already know you have in progress.
• 8:23
  SPEAKER_00: August was always going to be slow.
• 8:25
  SPEAKER_00: It has historically been slow.
• 8:27
  SPEAKER_00: You knew it was set, you knew it was what was coming in, what was predicted, what was already committed to.
• 8:44
  SPEAKER_00: This week, your action step is to build your first 90-day cash flow forecast.
• 8:50
  SPEAKER_00: Don't overthink it.
• 8:52
  SPEAKER_00: Open up a spreadsheet, create three different columns inflows, outflows, and then your net.
• 8:57
  SPEAKER_00: And then you can create 13 rows, one for each week of the 90 days, one for, or if you wanted to go kind of higher level, you can do one for each month if that weekly feels a little bit too granular, which is fair enough as well.
• 9:11
  SPEAKER_00: And then put those numbers in.
• 9:13
  SPEAKER_00: Start with what you know for certain.
• 9:14
  SPEAKER_00: Do you have recurrent client payments?
• 9:16
  SPEAKER_00: Do you have fixed monthly expenses?
• 9:18
  SPEAKER_00: Any scheduled tax payments or loan repayments that need to get on there?
• 9:23
  SPEAKER_00: Then add your best estimates for things that are maybe a little bit less predictable, which a lot of times we use historical numbers for those because those are typically pretty a really great estimate, basically.
• 9:36
  SPEAKER_00: What I want you to notice as you build it is that the act of building will help surface things that you had not consciously registered were coming.
• 9:45
  SPEAKER_00: Maybe there was an expense you forgot about.
• 9:48
  SPEAKER_00: Maybe there's a payment timing gap that you hadn't thought through.
• 9:52
  SPEAKER_00: A month that looks tighter than it felt when it was just a vague future thing rather than a specific number in a specific column.
• 9:59
  SPEAKER_00: That moment of noticing that small, slightly uncomfortable recognition is really the whole value of this entire exercise.
• 10:08
  SPEAKER_00: Because what you can see, you can prepare for.com, take a look at our services, some of the things that we provide, or just to connect and let's take a look at things together.
• 12:17
  SPEAKER_00: And in the meantime, I will see you on the next episode.
• 12:21
  SPEAKER_00: Bye.
• 12:22
  SPEAKER_00: All right, that's your episode this time.
• 12:24
  SPEAKER_00: Don't forget your action step.
• 12:26
  SPEAKER_00: I want you to actually do it, not just add it to the list.
• 12:29
  SPEAKER_00: If this episode was helpful, share it with a fellow business owner who needs to hear it.
• 12:34
  SPEAKER_00: And if you're ready to go deeper on your specific numbers, book a strategy call with Sidekick Accounting.
• 12:39
  SPEAKER_00: Go to chatwithmeg.com, and I'll see you next time on Profit Points.