The Big Pay-off of Building a Sales Forecast Alongside Your Cash Flow
A popular structure for a forecast often includes running a sales forecast alongside your cash flow forecast. This view is valuable to not only help you figure out your near term cash flow and identify potential issues, but take a longer term look at your potential cash flow through your sales forecast.
This approach is very popular among project-based businesses that are in a constant state of sales as they land contracts and run them through their business. Not only does the sales forecast help them keep their staff busy and a constant flow of cash into their business, but it also helps them identify potential capacity issues before they hit.
There are other benefits as well. Looking back on your sales pipeline scenario vs. your cash flow scenario in past months can help you see how many deals you’re closing vs. pitching (if you leave lost deals in your sales scenario) and also see how long it takes for the typical closed deal to turn into receivables that your business can bank on.
How to Set This up in Dryrun
Whether you use Dryrun integrations or add in your data manually, the overall structure remains the same. We will create your base scenario that contains your recurring budget and expenses, then we will add in accounts receivable (invoices you’ve sent out) into Receivables in your cash flow scenario and potential deals into Receivables in your sales forecast scenario.
These instructions will show you how to import data from our integrated partner tools but you can simply add in these items manually if you choose.
Creating Your Cash Flow Scenario
Overview: We’re going to create a scenario that lets you scan and track your recurring budget, your bills (AP) and your invoices (AR). We’ll keep this scenario separate from your sales pipeline scenario, which we’ll build later in this tutorial.
1. Connect to Xero or Quickbooks online
Select the ‘Integrations’ from the left side navigation in your account area. Look for the Xero/QBO icon to connect Dryrun to your cloud accounting tool under the ‘Connect your Dryrun account to your favourite tools’.
‘Connect’ or ‘Disconnect’ status will be displayed. Click ‘Connect’ and walk through the easy steps for integrations. Later in the tutorial we will be importing invoices and bills into different scenarios.
2. Create a New Forecast
Still in your account screen, click ‘New Forecast’. The forecast starts out with a single scenario.
3. Build Your Repeating Budget in Recurring
In this new scenario, create your recurring budget – doing so at this point isolates your regular, repeating expenses from your variable expenses and income so that you’ll be able to quickly scan through the irregular payments. Starting in this manner lets you focus on the variable bills and invoices that really affect cash flow.Use Dryrun’s inherent flexibility to build in as much or as little detail as you need – you can always update with more detail whenever you need to. (Note that recurring budget items repeat forever unless you choose end dates for each item.)
You can always edit items at any point in time if there are changes to your business budget.
4. Import your invoices and bills
Time to import!
Hover over the Scenario Title (in this case it’s entitled ‘Cash Flow’, then click on the Settings ‘gear’ icon. Click on the Xero/QB logo and adjust the import settings.Let’s import bills and invoices from the first day of current fiscal year (Jan 1) by checking the applicable check-boxes and selecting the correct radial option for dates.
Note: If you are using Dryrun manually, add in only your Bills at this point. We will add in your Invoices into Receivables after we’ve duplicated the scenario.
Your data is now in Dryrun and reflected on the graph.
5. How bills and invoices work in Dryrun
To understand how data is pulled into Dryrun, it’s worth noting that bills and invoices are pulled by their due date.
Both bills and invoices are categorized by company and named by the invoice. Be aware that an invoice’s ‘Expected Date’ and a bill’s ‘Planned Date’ override their Xero ‘Due Date’ for a more realistic look at cash flow. Dryrun also flags due and overdue bills and invoices so you can see them at a glance, and similarly tracks partial payments.
Any changes you make in Dryrun will not change your Xero/QBO data, but changes in the imported data (i.e. when you accept a payment) will be updated in Dryrun the next time you click ‘Refresh’.
6. Here’s your cash flow forecast
With cash flow isolated, it becomes a simple matter to review your budget and quickly note where invoices and bills are due. You can also easily move data around to test key assumptions and strategic moves.
With cash flow isolated, it’s time to build a sales scenario that can be overlaid onto your other scenarios – perfect for goal setting and to visualize strategic next-steps for your business.
Building Your Sales Scenario
Overview: We are going to duplicate the cash flow scenario and substitute potential deals for invoices in order to create a sales pipeline that will sit alongside the cash flow scenario. This will keep realistic budget and bill data at our disposal but allow us to use the receivables area to test out different successes and strategies.
7. Duplicate your Cash Flow Scenario
Open the scenario settings by hovering over the scenario title and click on the ‘gear icon’ – then click on ‘Duplicate’.
Open the settings in the new scenario and change the name to ‘Sales Pipeline’, then click ‘Save’ which will refresh the most current information.
8. Disconnect the Receivables
Open the scenario settings again for your renamed scenario (now titled ‘Sales Pipeline’), and click on the Xero/QBO logo.Deselect the ‘Invoices to Receivables’ option by removing the check mark. Ensure that you’ve left the ‘Remove all imported invoices’ toggle in the ‘on’ (green) position. Click on ‘Save and Refresh’.
Now all budget and payables data is present and there are blanks to work with for receivables (soon to be Account Hopefuls/sales pipeline data).
9. Enter your Potential Deals
‘Receivables’ in your new ‘Sales Pipeline’ scenario is now a place to enter all the potential deals that are in various stages of your pipeline.It’s easy to enter deals by the date you are expecting them to close and the total value of the deal. If possible, adding more detail such as the date you actually expect cash to move to your account, indicate dates of partial payments or deliverable payments if that’s a likely occurrence, or even add the percentage of likelihood you’ll land the job in the deal name or category (also called a weighted sales pipeline) will prove inform the accuracy of your cash flow.
Similar to Xero data, if potential deals are imported from Pipedrive through Dryrun’s integration feature, you can still manipulate them to your satisfaction in Dryrun but they will only update when you make a change in Pipedrive. Remember to remove lost deals as applicable.
You can duplicate your new ‘Sales Pipeline’ scenario to test assumptions and track key data, i.e. one for each salesperson or store location.
Viewing your sales pipeline alongside cash flow offers critical info for each business decision you make. Viewing sales, budget and invoices along a timeline in Dryrun allows you to see critical dips in your cash flow and plan accordingly to close deals and to manage job capacity before a project gets started.Looking further out to the next week, month or quarter, you can identify potential pinch points of slow sales, head off cash crunches, and also navigate potential capacity issues by managing project start dates.
Now you can use additional scenarios to test out all sort of ‘what if’ situations that every business faces. Identify slow periods well ahead of time, prepare for capacity issues during busy periods, plan for expansion and asset acquisition at best possible time and chart the path to grow your business.
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