Xero cash flow forecasting, a new tool for your e-commerce store

As an e-commerce business owner, you should make the most of every tool at your disposal. Xero announced at their recent conference that they are soon to provide built-in cash flow forecasting that will make your business decisions more straight-forward and more informed.

We always advocate for Xero as we believe it is the best choice for e-commerce businesses and with this latest tool arriving it is even more essential than before. There is a stark difference between profitability and cashflow so let’s look at how this new tool will help you grow your e-commerce business.

What is cash flow forecasting and how can it help you?

The New York Federal Reserve estimates that 82% of small business failures are due to a lack of understanding or mismanagement of their cashflow. That is a hugely significant number, which highlights the importance of this tool.

Cashflow forecasting looks purely at the money-in/money-out equation. It doesn’t matter how profitable your business is if you are going to be unable to pay the bills. If used correctly, cashflow forecasting can show you the consequences of each transaction and show you when it is optimal for each transaction to occur.

Using cashflow forecasting you can see if there are times you will need to put in more equity to keep your e-commerce business afloat and you can also see if there is a surplus that would be better reinvested on stock or R&D. If you are running a budget (which every business should), cashflow forecasting will help you stay on target, and notice shortfalls before they happen.

Cash flow forecasting for small businesses

For small businesses cash flow forecasting will tell you whether you have sufficient funds to run the business and expand it. With cash flow forecasting tools and software, SME businesses can anticipate cash shortages, prevent insolvency, and know what they have to do to grow.

Cash flow forecasting for large businesses

For large businesses, cash flow forecasting helps you understand how each financial decision impacts cash flow. This helps businesses to know the consequences of business decision making. Additionally, cash flow can help a large organisation set and reach goals. Cash flow forecasts can let large businesses make key decisions based on financial predictions such as whether to expand to a new market or to open a new branch.

Xero cash flow forecasting

Xero has always had scope for cashflow forecasting, through data exports to Excel or integrated apps such as Float, but for the first time, Xero cashflow forecasting is being built into your Xero hub.

An overview

Xero gives a clear indication of where your finances are, and where they are likely to be based on predictions from your previous data.

Before the introduction of Xero cash flow forecasting, you could examine cash flow data in segments, which limited clarity and understanding. Xero cashflow forecasting brings all the pieces together in one easily digestible part of the app.

What Xero cash flow forecasting includes

Xero cashflow forecasting will “visually project the user’s bank balance 30 days into the future, showing the impact of existing bills and invoices that are paid on their due dates”.

You are able to select from your list of bank accounts and switch between a 7-day and 30-day view. You’ll have clear information on the impact of paying a bill or being paid later, so you can make educated decisions on what to pay, and what to chase, when.

You can quickly get an idea of your short-term cash flow and get an overview of your business in one place. Through the dashboard, you can track and check your businesses financial health while accessing analytics to get personalised predictions.

What next?

We encourage our clients to Xero cash flow forecasting and offer an advisory service to walk through how to utilise the information it creates.

If you would like assistance making the most out of your Xero subscription, or are interested in moving to Xero, get in touch with our team today. All our clients receive a Xero subscription as part of their package and our full support.

Why choose Unicorn Accounting?

Ensure you keep on top of your finances and tax obligations by outsourcing to an accountant. This means that you don’t need to worry about your end of year accounts, payroll, or bookkeeping requirements.

At Unicorn Accounting we are e-commerce accountants who help make your online business a growing success. We offer e-commerce accounting advice, financial management, bookkeeping, cash flow statement, and tax filing services to support and scale your business.

Our team of accountants and Xero-certified advisors have experience working with both small start-ups and family-run online stores to large-scale, international retail and e-commerce brands.

If you’ve got an online store, we have the best solution for you. Providing you with a financial arm to your business through our sector experience, and skills with innovative technologies.

To see how we can help you maximise the scalability of your e-commerce brand all year round, get in touch with Unicorn Accounting today. Or click here to get a free quote.

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