QuickBooks Cash Flow Planner & Forecast: A Guide to Your Cash Flow
It doesn’t take much time running any type of business to figure out the importance of cash flow for your company’s financial health. Even if you’ve invoiced customers, it’ll often take them 30, 60, 90, or even longer to pay in some cases. To figure out your cash position in the popular accounting software QuickBooks Online, there’s are a variety of handy tools, including QuickBooks Cash Flow Planner – a feature that predicts cash flow based on past data and your own inputs to show the result of different cash inflow and outflow scenarios, so you can plan accordingly. We’ll also go over how to use and understand QuickBooks’ cash flow forecasting tool called the Statement of Cash Flow that will show you projections based on the cash coming in to and going out of your business during a specified period of time.
We’ll also dive into how you can best manage cash flow as a business owner from our own experience as entrepreneurs here at FundThrough, and from learning from our own clients who factor invoices with us to make managing their own cash flow faster and easier (especially since we’re integrated with QuickBooks). Let’s get started!
QBO Cash Flow Planner: Why It Matters
The QuickBooks Online cash flow planner is more than just a fancy display of your financial history and future money. This interactive tool makes it possible for small and medium-sized businesses to more accurately estimate cash flow. You can see how your cash flow will be affected based on different choices or outcomes. When these businesses better see their cash flow position, they can make strategic movies with their revenue and prepare for a worst-case scenario.
Consider this: 1 in 4 small businesses only have 13 days’ worth of cash on reserve. The vast majority of businesses have just about 27 days covered. Without an accurate forecast range or cash flow analysis tool, these businesses struggle with even “small” cash flow issues. Forget planning for expansion—poor cash flow management in a crisis can devastate a business.
This is where the QuickBooks online cash flow planner really shines. Business owners and CFOs can take control of their regular accounting with adjustable and accurate cash flow forecasts.
With this cash flow projection from QuickBooks Online, business owners can review reports, plan scenarios, and use this data to improve their revenue stream.
How to Use the QuickBooks Online Cash Flow Planner
There are a few different scenarios, but the two most common are dealing with unexpected expenses and planning for expansion. Let’s focus on the first example.
Imagine that a key piece of equipment breaks, and you need to replace it entirely. Your business success relies on this item, so you immediately begin estimating the cost. After finding a competitive price that very day, you enter it into the cash flow planning application. You also adjust your revenue, since you won’t be able to work at full capacity until it’s replaced.
Immediately, you can see whether or not you have the cash on hand to fix the problem, and how long your business can last. Depending on your cash flow details, you may decide it’s best to find funding quickly to reduce the financial strain. For businesses with long payment terms, invoice factoring could help—and you can add this data into the forecast software, too.
But what about if there’s a new growth opportunity?
In the same tool within QuickBooks Online, you can add future items and analyze your potential income. You can add the potential income from the project, as well as expenses. In some cases, your cash flow may be negative for the first month or even a couple of months. But the new opportunity could provide a big spike in revenue when your customer pays and leads to more earning potential down the line through future projects. The only question would be whether or not you can afford the upfront costs for materials, labor, etc.
Outside of cash flow scenario modeling, you can also use the tool to monitor your monthly or quarterly inflows and outflows. As you encounter new expenses or growth opportunities, you can add information into the planner for actionable insights. For example, you may choose to cut spending after a particularly slow quarter or increase it as your high season approaches.
Master Your Cash Flow
Getting Started with the Cash Flow Planner and Forecasting in QuickBooks Online
There are a few simple steps to getting started with this interactive tool in QuickBooks:
- Create an account
- Connect QuickBooks to your bank account
- Connect QuickBooks to your credit card accounts
- Add, delete, or edit manual items, if necessary
When you connect your bank and credit accounts to the software, you will be able to view a transparent cash flow statement in QuickBooks Online. You can also customize your cash flow analysis through the settings button or export your cash flow details to a PDF.
All QuickBooks payments activity have different labels, too. This cash flow planning tool may label a transaction as an invoice, sales receipt, bill, or expense. You may also see business activities shown as “predicted” or “planned.”
A predicted transaction is an expected money in our money out event based on your financial history. A planned event, meanwhile, is a manually added transaction.
Getting setup in the QuickBooks Online cash flow planner tool is fairly straightforward. So is generating a cash flow forecast report.
How to Run a QuickBooks Cash Flow Forecast
The cash flow forecast in QuickBooks Online is a fairly simple, yet powerful tool. Be sure that you’re using the accrual accounting method (instead of the cash basis accounting method) for the report to be available. Instructions for desktop versions may vary. Here’s how to run a QuickBooks cash flow report:
1. Go to the Reports section.
2. Search for Statement of Cash Flows in the search bar.
3. Click Statement of Cash Flows.
4. Click Customize to change any settings as necessary, such as the date range.
5. Click Run Report to see your cash balance.
You’ll now have a clear QuickBooks cash flow forecast so that you’ll know your actual cash position, complete with graphs for a visual representation. You can use this information in order to plan for any shortfalls or rest easy knowing you have positive cash flow.
What Is QuickBooks Cash Flow? A Guide for Business Owners
The QuickBooks Cash Flow Forecast Center gives you all the information you need to manage your business cash flow using your bank and QuickBooks activity. You can get cash flow projections for cash inflows and cash outflows for 30 days or 90 days into the future. It also syncs all of your bank accounts, automatically updating with your bank balance. This eliminates the need for manual tracking with spreadsheets, saving you time.
Once you have a cash flow statement or cash flow projector in hand, you can use the information to review:
Outgoing expenses. Regular expenses include items such as rent, utilities, loan repayments, and similar costs. Fluctuating expenses include things like payroll and the costs of goods sold. You can always adjust any projections once you have firm numbers.
Cash inflows. When accounting for cash coming into your business, consider guaranteed inflows such as grants, royalties, and tax rebates or refunds. If necessary, you can estimate sales revenue you expect to receive.
For more information about QuickBooks Financing, our complete A-to-Z Guide has you covered.
Managing Cash Flow as a Small Business Owner
Cash flow can be difficult to manage for small businesses, especially if they lack cash reserves and their customers demand invoice payment terms that are months long. Day-to-day accounts payable and operating expenses still have to be paid – things like payroll, supplier payments, marketing expenses, and small business taxes – but cash often doesn’t come in quickly after work is done. This often leaves small business owners with negative cash flow.
Additionally, cash flow management can be difficult for small business owners that are quickly growing. Not only do you have to pay daily business expenses in this scenario; you also need to have cash upfront to buy supplies, hire contractors, and take care of any other expenses for taking on large projects or more customers.
As a result, many small business owners look for ways to get positive cash flow by improving their current cash flow issues. Because banks often aren’t interested in extending a line of credit to a small company with a short (or non-existent) credit history, small business owners often have to get creative. This can include:
- Asking for loans from friends and family
- Charging expenses to business credit cards
- Exploring alternative finance options like peer-to-peer lending and merchant cash advances
- Using invoice factoring to pay for expenses and growth with cash they’ve already earned
Invoice factoring is a financial tool where a business owner sells invoices to a factoring company. The business owner receives cash for the invoice amount, usually less fees, ahead of the payment terms. The business owner’s customer, who is responsible for paying the invoice, instead pays the invoice amount to the factoring company according to the original payment terms. (It’s important to note that this is different from invoice financing, where a factoring company still gives a business owner cash for their invoice, but the business owner pays back the invoice amount themselves, plus a fee.)
See our blog on the definition of invoice factoring for more information about it and how it helps businesses like yours grow and improve future cash flow by avoiding potential cash flow problems.
Analyze and Understand Your QuickBooks Cash Flow Forecast
You can only make informed decisions with confidence for your business if you know where you stand financially. The QuickBooks cash flow forecast gives you that information by revealing your actual cash flow and sources of revenue. By seeing cash inflows and outflows that have already happened for a given time period (i.e., on a quarterly or monthly basis ) it’s easy to see how much cash you have on hand. Because QuickBooks Cash Flow Planner (and the statement of cash flow) forecasts cash coming and going from your business, you’ll also be equipped to undertake the right financing activities if you don’t have cash reserves and negative cash flow is on the horizon.
Use QuickBooks cash flow forecast to see how much you've made
There are two columns in the Cash Flow Forecast that show how much you’ve made. The Accounts Receivable column includes the customer payments you’re supposed to receive based on the payment terms you’ve logged for each transaction. The Net Inflows column projects the cash inflow for each week based on data from the Accounts Receivable, Accounts Payable, and Bank Accounts columns of the report.
The QuickBooks cash flow forecast isn’t the only financial statement that can help show how much you’ve made. It’s also important to look at your:
- Balance sheet
- Income statement
- Quarterly and monthly expenses
Identify your top selling items
Additional reports are available that could shed light on how to improve your cash flow in QuickBooks. If you navigate to Reports > Standard > Sales and customers, you can see two reports that will help you identify your top-selling products or services. The summary of the sales by product or service shows the total sales for each product or service. Sales by product or service detail show sale transactions by product or service.
See which customers have upcoming and overdue invoices
Keeping an eye on accounts receivable outside of the QuickBooks cash flow forecast will help you manage cash flow and make sound business decisions. One way to do that is to see invoices that are coming up or are past due so you can follow up on any late payments. To do this, choose Reports > Transaction List by Date > Customize > Choose the range for payment dates > Check Transaction Type > Select Invoice > Check A/R paid > Unpaid.
See which bills you need to pay
It’s easy to see your bills and manage them in QuickBooks. Simply go to Expenses > Vendors. At the top, you’ll see a bar showing amounts for Overdue, Open Bills, and Paid. To pay a bill, select New in the upper left-hand corner and Pay Bills. To pay bills online, check the box next to each bill you want to pay, then click Schedule Payments Online. Choose either your bank account (or account with other financial institutions), debit card, or credit card. Then choose how your vendor will receive payment (you can pay by check even if you pay online). Finally, schedule your payment dates.
See where you can cut business spending
One of the key components for avoiding negative cash flow is keeping your expenses in check. You can do this by viewing the Profit and Loss report. Click Reports in the left-hand menu, and choose Profit and Loss from the Favorites section at the top. From here, you’ll see all your expenses broken down into different categories, such as advertising, materials, and insurance. (The report pulls this info together from all the transactions you’ve entered manually or downloaded from your synced business bank account or credit card.) You can then consider each area, your highest cost centers, and where you could cut and save additional cash.
See your top vendors by expense
Another way to view expense data, and get a clear idea of your operating activity, is by seeing which vendors you’re spending the most money on. Go to the Reports menu on the left-hand side of the screen. Search Transaction list by Vendor in the search bar. In the Report Period Field, select the date. Then click Run Report. You can then click into every line item to see more details about how much money you’ve spent with a vendor and for what products and services.
QuickBooks Cash Flow Forecast Tools Ensure You Always Have the Full Financial Picture
The bottom line is that you can’t plan for your business’s future without knowing where you’re starting from. QuickBooks cash flow forecasting gives QuickBooks Online users a convenient and simple way to assess the status of their cash flow situation with just a few clicks. Reviewing this information on a regular basis lets you know if you’re on track to meet your targets, and whether or not you can take on any growth opportunities that come your way.
At FundThrough, we understand how vital accurate cash flow management is. That’s why we’ve partnered with QuickBooks Online to make applying and accounting for invoice factoring a cinch.