The Difference between Cash Flow & Revenue
Revenue is a measurement of inflow of money and nothing else.
Cash flow is a measurement of money that comes into a company in the form of sales as well as other methods and depending on circumstances can be a negative amount.
Forecasting for Inflows & Outflows
When you forecast your outflows, you’ll need to include both fixed and variable costs. Some costs will remain largely the same: payroll, inventory, shipping; while others will vary based on market conditions and elements outside your control.
Inflows should be based on historical data and the real numbers for money that will come into the business, not the next great idea and what it can bring in IF only.
Setting up a Plan B
What is your Plan B? In the event that supply chains are disrupted by a major outbreak of a virus or rising seas cause shipping routes to be disrupted there are elements that are out of all of our control. But what you can control is the plans you put in place to compensate. A backup distributor whom you use from time to time who is local could be your saving grace in the event of an earthquake near your regular supplier. Plan B’s also are important for exit and succession planning.