Cash flow forecasting is an area of bookkeeping often overlooked by small businesses.
Whilst it's fine (and necessary) to record transactions in order to prepare VAT returns and annual accounts, not a huge amount of thought is given to what impact those transactions you are posting will have on future cashflow.
If you find yourself struggling at month end to find the cash to pay your staff (bad) or HMRC (worse), then perhaps it's time to look at your bookkeeping systems, as most modern packages, such as Sage or Xero, will include a form of cash flow modelling.
Cash flow is the flow of cash in and out of a business and managing that flow is vital to the success of any business, large or small. That’s where forecasting comes in; forecasting helps you predict the flow of cash in and out of your business to ensure you always have sufficient funds to pay your bills.