Transcript:
The 90 Day Cash Flow Forecast. I want to give you an example here. Most coaches or trainers won't really reveal some of their mistakes. I don't know that this was a mistake as much as just something that happened that I want you all to learn from.You have to know what cash you have coming in from and going out of your business. It's critically important - it's a matter of life and death.
My Moment of Clarity
I had a situation, and I vaguely remember the time of year, maybe September or October. I looked at my Wells Fargo account where it just sums up all your accounts, and the number was $305,000. So my business accounts, my personal accounts, and my liquid cash added up to over $300,000. And four months later, in January or February, I remember that number being $27,000.
I don't have a real documentation of what happened in between. Obviously business was slow and it was that time of year. I didn't have a separate business buffer account or anything like that, but I just remember that being a weird feeling. I didn't know what happened to $280,000 dollars. I really don't know what happened to it. It was a good/bad thing, because we were growing. I was investing in different things and trying a bunch of things and seeing what would stick.
That's part of the benefit of when I talk about the marketing pillars, that these are the four things you need to do, I mean it. Don't do anything else because I've tried it and I've wasted money on it.
The 90 Day Cash Flow Forecast
The 90 Day Cash Flow Forecast, I don't want you to over complicate this. But I've got a simple spreadsheet that you can use. I want you to make an appointment with yourself every Thursday at 9am. That's what I started doing once I had this moment of clarity where I've lost $280,000. Now every Thursday at 9am I make an appointment to do the Cash Flow Forecast with myself. The tool that I use now does it automatically, and my consulting clients use it as well. But you have to do this on a regular basis.
Let me show you the tool if I can pull it up here real quick. So you're tracking your Business Cash Position as of a certain date. These are the three months that you're looking at, so now we would put the date in here, and we would be looking at the next three months. So it's always the current month, then month +1 and month +2. And you can change some of the details here. Maybe you have a different bank or multiple sources of business cash.
It will add up your current cash position. Your projected cash inflows is where you'll do the best you can to calculate all of the closing you have that are already on the books. Add up the cash you have coming in from those closings. So you may be paying agents on those closings where you'll want to take the agent payments out of this analysis. This is cash to you. So if you have $100,000 gross but you're paying out $50,000, the number you put in here is $50,000. It will take your net cash inflow.
Next are your operating expenses that you estimate for the month that you're in. Say you operate at $12,000 per month, but we're already a week in, maybe you'll put -$9,000. These are always negative numbers.
So it takes our current cash plus the total closings over the next 90 days, minus the total upcoming expenses. It says at the end of three months how much you'll have in cash. So you know if the cash coming in has the ability to support the cash going out. You'll know your projected net cash for the end of 3 months, 2 months, and the current month.
Once you get this set up once, it's not going to take you a long time to do. You'll get the hang of it. But it will be ingrained in you that you need to look at your cash flow 90 days out all the time.
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