Smart Cash Flow Forecasting Habit #5: be a pessimist on incoming payments

As entrepreneurs we are optimists by default – otherwise we would be doing something else. But when it comes to forecasting incoming payments, it helps to be a bit of a pessimist. 

This saves quite a lot of time as you don’t have to spend time solving problems every time when things slow down a bit.

And things do tend to slow down quite often, especially if you are delivering project-based services to your clients, be they software development, preparing and running marketing campaigns, legal advice or anything else.

Your team might be a few days late with project deliverables, the client might be slow with accepting them, invoices can get lost…the list is endless. 

Therefore we recommend these steps when it comes to forecasting expected incoming payments:

1. Use your best judgement to determine the most likely date when each payment should reach your company’s account;
2. Add them in your forecast 1-2 weeks later;
3. If cash shortages are likely, look for other ways to avoid them; and
4. Try your best to ensure things happen according to your original forecast (1) 

The 1-2 week delay in forecasting the incoming payments will serve as a form of “stress testing”. 

But don’t rush to tell your clients or even your team that such a delay would not create problems…we are sure you know why.

Try the demo to find out how Tailwind works.

Discover also other habits for smart cash flow forecasting:

• Smart cash flow forecasting habit #1: add information as early as possible
• Smart cash flow forecasting habit #2: review your forecasts at least once a week
• Smart cash flow forecasting habit #3: go granular for the nearest 6 weeks
• Smart Cash Flow Forecasting Habit #4: automate what you can