Master Cash Flow Forecasting for Creative Businesses

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samantha-eck_2_02-20-2025_120206: Welcome to the Creative Minds Smart

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Money Podcast, where we turn financial confusion into creative confidence.

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I'm Samantha Eck, bookkeeper and fractional CFO for creative entrepreneurs.

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Each week I'm sharing my financial expertise and actionable

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strategies to help you build a thriving creative business.

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Plus, you'll hear from industry experts who bring fresh perspectives on growing

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your business beyond the numbers.

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Because building a successful creative business starts with

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strong financial foundations.

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Your next chapter starts now.

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You are listening to the Creative Minds Smart Mini podcast,

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and today's topic is cashflow forecasting, like I said, in the CFO.

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Episode, we will be talking about a few of these coming up.

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So we're gonna focus on cashflow forecasting.

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We're gonna talk about profitability.

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We're gonna talk about some common KPIs that creative service

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providers need to be looking at.

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And we're also gonna talk about the importance of benchmarking.

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But today we're really gonna focus and narrow in on the cashflow forecasting.

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So cashflow forecasting often gets treated like a chore.

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Because why would you wanna look at the future when you can just look at

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what's currently in your bank account?

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But it's actually one of the most powerful leadership tools you can have

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as a business owner, and it is such an underrated forecasting report that

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we need to really just talk about it.

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So in this episode, I'm gonna show you how you can use cashflow to grow higher

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and rest so that you can have complete and total clarity on your business.

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So cashflow forecasting is different from just bookkeeping because

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like I have mentioned before and talked about before, bookkeeping is

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based on what's already happened.

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So when I'm in there and I'm categorizing and I'm reconciling and I'm looking

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at your books, that's everything that has happened in the past.

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It's not anything that's happened in the future.

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It is past data that I'm looking at and making sure that it is accurate.

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Now, that's not to say that bookkeeping is not important.

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We need that past data.

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We need your bookkeeping to be up to date in order to get you these critical.

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Financial strategies and forecasts that we need to look at.

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So forecasting, when we think about it, it's what's about to happen, like

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what's gonna go on in our business.

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So it shows you how much cash you'll have on hand on a week by week, a month

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by month basis based on your income.

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You know, you two expect, and the expenses that you know are

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going to come in and it's not.

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A perfect report.

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I will tell you that right now.

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Forecasting is very volatile.

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It's very something that.

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Based on the information we put in, it's not gonna be perfect,

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but it's more about being prepared than it is about being perfect.

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We wanna utilize the data to kind of see if we can plan around it.

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And of course, the easiest way to have some sort of cash flow forecast is if

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you have monthly recurring revenue.

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If you have variable revenue, it's a little bit harder, but

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that's when we really lean on that historical data, like I was saying.

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So you wanna have good books?

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And good historical data in order to really utilize a

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forecast or a cash flow forecast.

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So you might be wondering, okay, that's great, but why is a

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forecast so critical for growth?

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I talked about this a lot in the last episode, but a forecast is really

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critical because it's going to help you determine if you can hire right now,

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if you need to delay an investment or if you have enough to pay yourself.

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And I wanna just really narrow in on those right now.

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If you were saying, okay, I want to hire a new account manager for my business.

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I know they're gonna cost an extra $700 a month, can I afford that?

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And we punch that into your forecast and we say, okay, how is $700 a

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month going to impact your business over the next five, six months?

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And we see that you can hire them this month, but next month, you

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know you have a client leaving, your income is immediately gonna drop.

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We know that Maybe it's not the right time to hire right now.

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A or B, we know that you need to get another client before you can feel fully

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confident in being able to hire right now.

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Same thing with the investments.

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If you're looking at that and you're saying, I wanna purchase a $5,000

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educational course so that I can grow my business because I feel like this is

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gonna be so valuable, and it'll just help you determine if you need to delay it.

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Because again.

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Not necessarily delay it, or if you need to have more clients, if you're

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like, okay, I need one more client before I can buy this this month,

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and then I will feel comfortable.

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Or if you're like, okay, you know what?

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I have some expenses dropping off in the next couple months.

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I'm gonna wait a couple months to get it.

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And also.

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Analyzing and saying, okay, I know I can, I need to pay myself $5,000.

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I'm gonna predict that across the next few months.

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So if I'm making sure that I'm paying myself $5,000,

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how much do I have left over?

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That's why it's so critical to being able to grow your business because

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you're gonna have all of that data at your hands and being able to actually

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understand if you can hire, if you can invest, if you can pay yourself.

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So a forecast just lets you respond early instead of reacting late, because of

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course, again, if you're looking at six months from now and you're like, can't.

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The, just as an example, you're like, I wanna hire a bookkeeper.

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And we put that in your forecast and we see that $500 a month or a

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thousand dollars a month is fine for right now, but in six months when you

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know you have some clients who you're not sure if they're gonna renew or

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not, that income is gonna be down.

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Now you can say, okay, well, hmm, what do I need to do to make sure that in

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six months I can keep this bookkeeper?

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Because now you're gonna know.

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You're gonna know exactly what's coming and how you can prevent it.

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Okay, so now we've try and kind of talked about it.

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I wanna talk about what a good forecast includes.

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I'm not gonna teach you how to make a forecast, that's really hard on

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a podcast that's really hard to actually explain and like go through.

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But I really want to talk about like what a good forecast includes so that maybe you

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can kind of like help, help, I can help you piece together some form of forecast

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so that you can do something yourself.

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So the first thing you're gonna need is your starting cash balance.

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And before you're like, okay, I'm gonna put in the $5,000 I earned last month.

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No, nope.

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No, we don't do that.

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Your starting cash balance is the money that you have in the bank right now.

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So if you've $3,000 in the bank, that is your starting cash balance, not

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the income you have coming in, not the income that you had from last month.

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It is the money that is in your bank account today.

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That is your start cash balance.

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The next thing is your expected income, so anything from your contracts, so

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maybe you have an outstanding contract or a payment plan from your retainers.

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If you're a social media manager and you have clients that have retainers from

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any launches that you might be launching this month, maybe you're launching a new

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course and you expect to make $30,000 from that course of the course of the month,

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again, that's expected income and then.

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Of course, any sort of like, other launches that you might be launching,

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maybe you're launching a new service, whatever income you think that you

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might be making in the next month, the month after, the month after.

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Usually we try and predict like a set amount with like a percentage increase

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based on like either historical data or what you think is gonna happen.

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So for example, if I'm using myself as an example, I try and

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onboard five clients a month.

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That average between 500 and $1,500 in retainers.

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So if I cut that.

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In half and say, okay, the average client is gonna be, you know, $750.

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That's a 30% increase.

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So I'm expecting to grow 30% every month if I got all five clients.

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So I'm putting that data into a forecast and saying, okay, how do I get there?

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I need to get all five of these clients and need to be around this much, and

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that just helps me to predict that.

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Then you have your.

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Fixed expenses.

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So your fixed, non-negotiable expenses are things like payroll, software,

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subscriptions that you need for your business, and then things like rent,

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things like rent for your building, not rent for your own personal

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needs, rent for your business.

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A non-negotiable expenses or fixed expenses are things that your

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business needs to survive and are a consistent price every month.

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So a Google subscription, for example, for Google Workspace is 1279.

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For one user that is consistent across every month, that's a fixed expense.

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Then you also have your variable or seasonal costs.

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Or what I, yeah, your, what I like to call your variable expenses.

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So this is things like ad spend, things like maybe you have a

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contractor who works variable months or variable months, maybe you have a

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contractor who works variable hours.

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That is kind of like a variable cost, whatever you have that is not a set

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cost is a variable or seasonal cost.

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And then at the end of the day, you have your target buffer.

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So what you need to feel safe, so if we're talking about what I'm talking

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about with those three to six months,

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you wanna make sure that that buffer is in there so with all of this

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kind of coming into play, we're making sure that we don't have drop

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below that buffer that you've set.

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Again, a forecast isn't something rigid.

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I know you might be thinking it's something similar to a

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budget, but it's not rigid.

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It's responsive, and we're gonna update it like it's a living document.

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So as the month goes on, we make sure that it's.

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Consistently updated so that it's consistently accurate.

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It helps us to know like, okay, so if I send my clients a monthly or

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a weekly update, I can say, okay, you know, based on the expenses

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that we've had so far this month.

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We're expected to hit a

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negative this month so that client knows one of two things.

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Either they need to draw back on expenses, they need to hold back expenses, or

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they need to increase their revenue so that they don't hit that negative month.

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So it just gives you that kind of like responsiveness that you

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need in a business to survive.

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So.

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Now that we know the basics of a good forecast, we know what one is, what

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changes when you start forecasting because you're like, okay, Samantha,

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but why does this even matter?

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Like, what is going to, how is it gonna impact me?

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Of course, when we start forecasting, you know, hiring stops being such

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a big leap because it's logical.

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You know, if you can afford to hire, you know how much you

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could afford to hire someone for.

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And if that's not a price that you want to hire someone

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for, you wanna hire them more.

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For more, you know, that you either need to have better, like more clients or

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better paying clients or whatever that is.

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You know, you stop underpaying yourself as a just in case,

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because now a again, you're.

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You are accounted for in your forecast.

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You know that you need to pay yourself $5,000, $9,000 a month, whatever it

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is, and there's no more just in case, because that's in your forecast.

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You know that you could afford to pay yourself $9,000 and that you'll still

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have $5,000 left over at the end of the month unless you change something.

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And then of course, you can align things like launches, price

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changes, or investments with your actual financial readiness.

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You know that that uncertainty is now a strategy.

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And it's gonna be a gift to your bank account and to your nervous system

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because you know what's coming.

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You know you can do things.

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You know you have a launch coming up in July.

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You know that you can plan some bigger expenses around them because

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your launch is probably going to be successful based on previous launches.

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Instead of making a decision just because it feels good or just because you think

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it might be good, you have now data that backs up that decision and is going to

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empower you to feel confident about it.

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You're not gonna feel like you can't do it or you don't know, or like you

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might go into the red this month.

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You know, you know, and it's so powerful and I want that for you.

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I want that powerful strategy for you, which is exactly why

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I'm talking about these things.

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So you might be thinking, okay, so I'm doing a cash flow forecast,

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but I just don't understand it.

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When might you need me?

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When might you need a fractional CFO or someone to kind of step in

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and give you some sort of advice?

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We've talked about it before.

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CFO strategy and everything like that is for every level of business.

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It's not just for small business or big businesses, it's for

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all types of businesses.

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So you can buy a template online.

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There's tons of templates with cashflow forecasts, things like that.

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That's great and I think that it's an amazing starting point for you to just

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get a template and start forecasting.

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But what I want you to understand is that most templates don't account for nuances.

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They don't account for the different income cycles.

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They don't account for retention rates, and they don't account

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for the shifting costs.

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They're expecting you to put in data that you have consistently.

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But they're not expecting you to really understand what's going on.

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Now, I can give you a cashflow statement and say, here's your cashflow statement.

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That is not a forecast.

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It does not help you with anything.

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Forecasting isn't just about filling in numbers or looking at numbers.

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It's about knowing what those numbers mean.

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It's about knowing that.

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You know, the contract, how the contract labor is going to affect your bottom line.

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It's about knowing how the revenue is going to kind of feed

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into the rest of everything.

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It, you really want to be able to understand it because we're not just

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tracking money, we're really focusing on creating a narrative of where the business

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is going and how you're getting there.

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So if you are like, okay, you know, I feel like I'm not

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getting that out of a cash flow.

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Like analysis or a cashflow forecast, then you, that's when

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you definitely need someone to come in and kind of help you with that.

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And I'm totally open for discovery calls or to chat about this.

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Cashflow forecasting is a completely separate add-on, so

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you can get it at any stage.

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If you are in my lowest package to my highest package, I don't

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usually offer it to people I don't do bookkeeping for because in

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order to forecast appropriately, I need to know your numbers.

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So.

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I can do it, but it might not be as accurate as if I

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was doing your bookkeeping.

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So if you enjoyed this episode, please like it, comment, share it with a

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friend, and as almost get out there on social media, share this podcast so

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that people can find it like you and really learn more about their business

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and their finances, and really grow appropriately, grow their business to

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newer heights and different places.

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If you wanna hear a new topic, make sure to fill out the form

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in the description box below.

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And as always, there will not be any more guests at the as of the end of this year.

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So make sure that you guys are filling out any topics you want

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to hear from me so that I can chat your ears off like I have been.

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Otherwise, I wish you the best week ever.

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We will see you next week.

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Farewell fellow travelers.