Cash flow forecasting and the SMB

Discover how cash flow forecasting can vastly improve the survival of SMBs and the relationship with their financial service provider.

It’s an unfortunate truth that SMBs are a common casualty in the business world. Only 50% of new businesses survive passed the five-year mark, with one of the biggest hurdles being finance related. But there is hope, as advancements in consumer technology are now filtering down to new business owners – and one of those advancements is cash flow forecasting.

Accurate cash flow forecasting can mean the difference between an SMB surviving or sinking, with many lenders requesting financial forecasts as part of credit applications and some banks dismissing SMBs altogether until their revenues have grown. By giving a small business owner the tools to forecast their cash flow, not only are they able to plan for the future, make more informed decisions and keep an eye out for potential growth opportunities, they can also benefit from access to faster and fairer finance from a greater selection of lenders.

But it’s not just SMBs who are the winners here. Some financial service providers offer forecasting products for free, while others opt to utilise the functionality as an additional revenue stream. Either way, it’s a great way to improve customer loyalty and satisfaction while staying competitive – one example of this is HSBC, who extended their cash flow forecasting tool to commercial banking clients in January

It’s also vital to consider how tech-savvy SMBs have become. With the digital revolution having been under way for a few years now, small business owners are actively seeking out partners who are able to offer data and process integration out-of-the-box. By making products such as cash flow forecasting available to small businesses, financial service providers are ensuring their place in an increasingly competitive digital market. 

How Codat can help

Via Codat, our clients help SMBs plan for the future by creating accurate forecasting tools using multiple data sources. These tools help SMBs understand their current financial position and develop better insights, which help them plan for their future, all the while building trust between the small business and the financial service provider.

For instance, commerce data can be used to factor live chargebacks and refund rates into financial models in order to get a more accurate picture of a business’ lasting revenue. It can also be used to segment sales by products, customers, locations, and more to easily identify growth opportunities or areas for concern, such as a large proportion of sales coming from a small number of customers who could churn or an overreliance on seasonal products.

Codat in action

Just one cash flow forecasting client who has benefited from Codat is Summit, who enable their users to build financial models using simple building blocks and logic developed by experts. 

We enable Summit to automatically populate their user’s financial models with data direct from their accounting package of choice, without having to invest significant time, resource, and money into building integrations in-house. As a result of our partnership, Summit benefits from our advanced configurability, best-in-class standardisation, and bespoke synchronisation. 

“We tried other services, both full-service engineering and APIs. Codat stood out among those alternatives with a deep feature set, robust development environments, and the technical support needed to ship on time.” – Matthew Wensing, Founder

If you would like to learn more about how Codat could help, please feel free to contact [email protected].