Cash Flow Forecasting for MLM
Cash flow forecasting is an important part of running your MLM business. Whether you are starting out, or established and growing your downline, good cash flow forecasting for MLM can help you make good business decisions and plan for the year ahead. Fortunately, MLM Accountant can help you.
How Does Cash Flow Work?
Cash flow refers to the amounts of money that go in and out of your business. Cash flowing in comes from your sales and commission. Basic cash flow forecasting for MLM is a great starting point to help you maximise your earnings from MLM. Cash flow planning is essential and once you know how, it will become one of the most important insights into the success of your MLM business and how to strategise your activity. First of all you need to know that there is enough money in the bank to pay your bills. Staying on top of your cash flow with a cash flow forecasting for MLM will show in advance if you’re going to run out. Cash flow forecasting for MLM allows you to plan ahead and avoid any problems. You can use cash flow forecasting for MLM to calculate how much you will need in reserve to pay your taxes, as well as all your other regular running costs. If your cash flow forecasting for MLM reveals a shortfall, you have allowed yourself time to make changes to your cash flow to cover your costs. You could choose to spread other larger costs out over the financial year. Or possibly you find out that you need to reduce your outgoing costs, or spend more time on making sales. On the flipside, your cash flow forecasting for MLM might show you are doing really well and you might want to consider how to use this to grow your business.
How to Start Cash Flow Forecasting for MLM
A good start is to plan as far ahead as you can reliably predict. If your business is well-established, you might have predictable sales patterns from previous years that you can use. To forecast your sales, look at last year’s figures to see if you can spot any patterns, e.g. increased sales at Christmas time. You can add predictions to your cash flow forecasting for MLM based on if your sales increased, decreased or stayed the same. If you are just starting out this can be more challenging, as well as taking into consideration economic fluctuations from unusual years such as 2020/21. However good business planning will help you make some initial guesstimates and test your ideas. As a new business you could start by predicting all the cash outgoings as this will give you an idea of how much money the business needs to bring in to make a profit.
Set Achievable Targets
Most businesses are interested in growth. This may well be one of your primary reasons for writing cash flow forecasting for MLM, however there are often further steps to take and goals to achieve before focussing on expanding your business. Set yourself achievable short term targets. Don’t worry if you can’t plan very far ahead. Your cash flow forecasting for MLM can change over time. In fact, it should. Once you have a good measure of how closely your income matches these figures month by month, you can use the results to predict more accurately. Adjusting your cash flow predictions in this way gives you great insight and can inform other business decisions.
Income and Expenditure
For each week or month in your cash flow forecasting for MLM, list all the types of income you expect to come in. There are cash flow software packages you can use, or a simple spreadsheet. Make one column for each week or month, and one row for each type of income.
| Income | Week 1 | Week 2 | Week 3 |
| Sales | |||
| Commission |
Cash flow forecasting for MLM is all about timing. Remember to enter the cash value in the week or month that it actually lands in your bank account. In other words put the figures in for when bank payments will clear.
Enter all forms of income, including any non-sales income such as commission. Add up the total for each column to get your net income. If your business offers a range of products or services you will want to break those down in more detail.
You also need to include your expenditure, also known as your outgoings. For each week or month, make a list of all the money you will spend. Once you’ve listed everything you expect to spend in each week or month, add up the total for each column to get your net outgoings.
| Expenditure | Week 1 | Week 2 | Week 3 |
| Rent | |||
| Salaries | |||
| Materials | |||
| Marketing | |||
| Tax bills |
Work out your Running Cash Flow
For each week or month column, take away your net outgoings from your net income. This will give you either a positive cash flow figure (if you have more cash coming in than you are spending) or a negative cash flow figure (if you are spending more cash than you have coming in). You can then keep a running total, from week to week, or month to month. Too many negative weeks could mean that you need to make changes to how you run your business. Equally a few positive months might signal that you’ve got enough money coming in to make more purchases. A running cash flow will help give you an insight to what are natural changes month by month and what are red flags.
How to Improve Cash Flow
Once you’ve created your cash flow forecast for MLM, make sure you go back and check what you estimated against the actual figures for the time period. This is important as this will show up the differences between estimated and actual figures so you can see why your cash flow did or didn’t meet your expectations. If your income isn’t going to be enough to cover your costs then this alerts you to the need to make adjustments. This could be reducing costs or seeking ways to increase sales such as improving your SEO or using social media in creative ways. Other ways could be to streamline or outsource your administrative or accounting operations.
At MLM Accountants We Know How to Help You
At MLM Accountants we can help you understand the best solutions for the success of your business. All you need to do is get in contact with us at MLM Accountants. Call us today 0203 237 2927 for help and guidance.
