Lesson five, forecasting. Here's the four things we're going to cover in this lesson. Number one, we're going to understand why forecasting is so important, and that most business owners skip the step. Number two, we'll learn how cash flow tool makes forecasting simple and easy to do on a regular basis. Number three, you'll see a demo of our cash flow forecast in action. And then four, we'll look for cash flow issues in your own business and build a course of action.

So gather your tools. And then let's get started. Every business needs a direction, where we're going to be one of the questions we're always asking ourselves as business owners. I see a lot of businesses out there that are forecasting by trying to create an income statement with expected profit. It's a great start, but it doesn't help us with managing cash, me earning profit and having cash just aren't the same, we have to forecast both. Many owners are skipping this step.

Because after all, who can predict the future? I don't know when customers are gonna pay. Heck, you might not even know when you're gonna pay. So it's pretty difficult but that's where forecasting comes in. forecasting is a tool that helps small business owners deal with the uncertainty of the future. I mean, when we talk about forecasting, we might hear words like budget or pro forma, let me just tell you a little bit about each.

First of all, a budget is a representation of what management actually wants to happen. It really doesn't change during the period at all, and it's used to compare actual results to the budget. A performer is like a budget, except for focuses on a specific event happening like what if we merged with another company? What if we take on another new loan? What if we secure that new big customer? It's like don't what if scenarios?

Like, what would my company look like if this happened? Now forecasting on the other hand, is a live and active document that tells you exactly what's going on now. It's updated frequently. And it's used to make short term operational decisions like adjusting staffing levels or inventory levels. So the sound like a lot of work, I'm not gonna lie to you it is, I mean, especially if you're using one of those old paper worksheets, like this one, or you're trying to manage multiple Excel workbooks, I mean, who hasn't spent hours trying to find a problem in a formula in Excel. But overall, it's just math.

But it can be simple math, or it could be highly complex and generally with accounting systems is pretty complex. Because we got customers we have vendors, we have dates, we have amounts, we have transactions of value. If you're the type of company that has 200, customer vendor relationships with thousands of transactions, how do you look back 13 to 24 months, analyze all those transactions, and then predict what's going to happen 13 weeks from now, it's a big problem. It's the exact problem, though, that we built cash flow feature in cash flow tool for, we automatically analyze all of those transactions and paint a picture that clears up the uncertainty of the near future. So let's take a look at how it works and how it can help your business. So here we are inside of cash flow tool.

Cash Flow tool is the powerful tool that lets every business understand what their cash flow is today. And tomorrow, you simply connected to QuickBooks Online or QuickBooks desktop. In a matter of moments. You get a future forecast and multiple metrics that help you understand your business. Since we just got done talking About the fundamentals of forecasting. Let's talk about how cash flow tool makes that super easy.

So inside of cash flow tool on the left side, you see that we've got a cash flow forecast, we've got dashboards for key metrics, alerts and notifications and documents. I'm going to focus now just on the cash flow forecast. inside of my cash flow forecast, I see an executive summary for Freddie's hardware. Up on the top I see some core cash metrics, my cash balance, my AR and my AP. Down below, I see a nice chart that shows me 12 months of history of cash in and cash out for Freddie's hardware. I also see six months of forecast out in the future.

Down below this chart are all the transactions that are associated with Freddie's hardware, both cash in and cash out. I can sort those by name, by type by date, or buy him out if I choose. This charts fully interactive. So if I'd like to turn off line for cash balance, I can do that. If I'd like to look at just my cash out, I can do that as well. Notice that when I do do that, it immediately shows me just those cash out items down below on my, on my transactions.

Same thing if I simply look at my cash in, it immediately shows me all of my cash in for that particular period of time. Let's go ahead and turn all these back on. One thing I can do is I can mouse over each one of these particular months and I can say you'll notice that I've got a number of bars here I've got open invoices for say june of 2019 47,000. I have manual caching of 65,000. And if I hover up I have a forecasted cash in of 36,000. Moving over to the right for cash out.

I see forecasted cash out of 37,000 and unpaid bills of 15,000. I can do that for each of the months. Again for August 19. I see my forecast asset cash in of 31,000. And I see forecasted cash out of 54,000. Right now for all of my transactions for the entire period of time for forecast.

Of the six months, I see a net difference between cash in and cash out of $816,000. If I highlight just a particular month, say, what's the projection for July 2019, I'll see a difference of 200,000. And it will show me all of the transactions just for July. If I'd like to select August as well simply hover over click it. And it shows me now both months with a net of three $370,000 and all the appropriate transactions for July and August. Of course, because this is interactive, I can also turn off the cash out and just look at the cash in for those same months, which now down below shows me all the cash in for those particular months.

I'm going to reset all these filters because I want to show you another key feature and that's searching. Searching is very powerful inside of cash flow tool. So if you've got a number of businesses that you're really dependent upon, you could simply search for those to see what the cash in or cash out for those particular customers and or vendors. In this case, I'm going to search for summit 24. Freddie's hardware does a lot of work with summit 24. And obviously, they've got some big cash in from as a result of this contract.

So right now it's netting $500,000 for some at 24. If I turned off a few of those, instantly, you see a live update of the amounts. If I turned off all of them, and shows me a net zero and save this. Notice that it immediately changes my forecast up on the chart above. There we go. pretty significant impact that some of 24 has on Fridays overall business.

Let's quit. turn those back on because that was just a one F. And I'll save that will immediately see the chart interaction as well. I can also go in, and I can start playing some What if analysis on this overall forecast. So if I click cash in, so let's say I'm going to get a new contract, let's say Freddie's hardware is working to land, the Seattle Center. And the Seattle Center is something that's going to be forecast. It's a contract of $600,000, over three months of $200,000 for three months, starting July 8, and going through September eight, and I'll add that in.

When I do so you'll immediately see that the forecast went up because we've got some additional ones in their course if I want to. I can simply search for Seattle Center. I'd like to turn those off just to see the impact. I can proceed to do that. So obviously, the net balance immediately changes of all the cash in and cash out. And when I say that will immediately see the impact of the forecast as well.

So clearly the Seattle centers, pretty important to Freddie's hardware as well. So here you can see that you can do some really nice modeling and immediately see the impact of your forecast, whether it's cash in or cash out, whether it's customers or whether it's vendors. This is a powerful tool that enables you to look at your overall forecast easily and effortlessly. One of the additional things that we have available on cash flow tool is the ability to look at a calendar calendar is a heat map calendar for six months out showing your forecast. Many people like to be able to see it in a calendar view. Green is the different shades, we've got some darker green, that's better, some lighter greens that aren't so good.

If I move for They're out. I don't actually see any reds right now if I happen to see some areas where I'm going to have shortfall, immediately, we'll see that. Well, let's go ahead and pick a particular day of August 16. And I'm going to simulate an expansion to Freddie's hardware. So I'm going to add a cash out. I'm gonna put in here, store expansion is clearly Fridays is growing.

And just to illustrate the not only the powerful, what if analysis, but also the ability to see real time update to the calendar, I'm going to go in there and put in a pretty significant expansion of $750,000. When I do that, I immediately see that the ending cash went to 465. And obviously in the chart, you immediately see a difference in the color. So you know, so what's really nice about that is you have the ability at a glance kind of an Executive Class to look at what months are good, what months are not Good, what should you be focused on inside of the each of the calendar, you'll notice that I have a little icon for in and for out. And that just simply says for that particular day, there's some cash in or cash out on the 17th, you'll notice that I only have a cash in from AJ shipping.

These are directly tied to the chart all the transaction as well. In fact, if I went back to the chart, and I looked at expansion, you'll see that I added the manual cash out of $750,000, I could turn that off, immediately see the impact to my overall forecast, because that had a negative impact to my forecast. Of course, I can turn that back on. Very powerful, very connected across the board. Additionally, you can take a look at all of your customers and all of your vendors. If you want to inside of your customers.

You can also simulate the ability or refine your forecast by adding a Additional customers, maybe you're going to get a new customer, you can put that in, when you're going to get it how many months very simple. You can also do that for vendors, you Hi, you hired a new vendor, you know that it's going to be a certain amount every month, or every week, you can simply enter that in. Of course, all this data is going to be read from initially from QuickBooks always synched with QuickBooks, and then from there, you can fine tune it so that you have the best forecast possible so that you always know what your forecast is, and you can make intelligent decisions today. That's cash flow tool. Cash Flow forecasting can be the difference in being a good company or a great company. And using cash flow tool rather than Excel or other manual methods will give you projections with less errors, and more insight.

So here's your homework for this course. sign into your cash flow tool account and take a look at your cash flow forecast. Here's some things you can look for. First of all, are there any cash despots Or are there some customers that seem to pay you slower? How about some expenses that you could pay slower or maybe cut out all together? Or maybe you see a customer that's ordered in the past that you haven't heard from, could be a sales opportunity.

Cash Flow forecast can help you stay in business. Me. Usually when you feel a cash flow problem, it's too late because business moves fast. So make sure you're getting into your cash flow forecast on a weekly basis. Cash Flow forecasting is used to help you understand how much money your business is going to need and when you're going to need it. And the cash flow feature and cash flow tool can be one of your most powerful business allies.