Why Are Cash Flow Forecasts Important to Small Businesses?

Cash flow forecasts are important for any company, but they are especially critical for small businesses, which may have fewer cash reserves and less access to borrowing money.

  • Fewer Cash Reserves: Larger companies may have larger funds of cash, but smaller companies may generally have just enough money on-hand to pay their normal monthly expenses. A month of unexpected costs can deplete those reserves to zero.
  • Less Access To Credit: When cash begins to decrease, larger companies likely have more access to credit — from banks and investors, or through other means. Small businesses have fewer options for credit. For example, loans from the Small Business Administration often require an extensive application process. A small business has the time to move through that process only if it’s been able to forecast its cash issues far in advance.