If you’re as confused by cash flow and business finance as we are, you’ll find this fabulous guest post from Kathryn Frimond of Your Local Bookkeeper very useful!

How do you know when it’s the right time to outsource management of your social media? Can you afford to pay for social media advertising and how much do you need to spend to get the results you are after? 

Maybe you are spending more time on social media than working for your clients. Or maybe you are up late at night frantically trying to schedule content for the coming days or weeks. Regardless of why you have now decided to outsource your social media management, you need to know if you can afford it. That’s where cash flow forecasting and management comes in.

If you have ever felt flush with cash one minute, and scraping the barrel the next, then you probably aren’t reviewing your cash flow regularly. A simple cash flow forecast should be set up and reviewed regularly before any outsourcing or advertising decisions are made on your business.

So, let’s start with the basics.

Cash and profit are not the same thing. You may have a perfectly profitable business, but no cash in the bank. How can that be? Well profit is an accounting term based on the accruals accounting policy. This might include invoices that have been sent out, but not paid. Cash is the physical money in the bank, available to spend.

You may have a budget that you review annually and never look at again. This is not a fully functioning live cash flow forecast to make big decisions from. 

I know what you are thinking. Where do I start? How do I make sure it is a “live working document”? and how do I read and interpret a cash flow once it’s completed?

How to start a cash flow forecast.

  1. Download my basic spreadsheet cash flow forecast OR book in a 20 min call for a demo of Fathom (our all singing all dancing forecasting software partner).

  2. Write down your regular repeating monthly income. Use your client invoices or your bank statements to do this.
    Total it up.

  3. Write down your repeating monthly costs – such as rent, subscriptions & salary or drawings.

  4. Deduct point 2 from point 1.
    That is your predicted cash flow. This can be added or deducted from your current bank balance.

  5. Bring these points forward over a 3, 6, or 12 month period.

  6. Think carefully about how much your lifestyle costs. Input all the payments you need to make to keep your life comfortable. This can be mortgage, rent, partying, food or pet expenses.
    This is how much you are going to take out of your business.

  7. Repeat step 5.


There you have it, a basic forecast. This should be reviewed at least monthly to keep it relevant.

A plant growing out of a stack of coins. Text reads "Money management for small biz. What you need to know to budget and forecast in your ethical business."

So how do you know if you can afford ads?

Hopefully, once you have completed the above steps, you’ll see there is money in the bank at the end of each month (if not, you’ll need to revisit your costs and/or think of some way to increase your income.)

Once you’re happy all your figures are right, you can start scenario planning.

Go on…add another line to your costs called “Social Media ads” and see what the maximum you can spend without breaking the bank is.

Say it’s £100 a month, what do you expect to achieve in return? One new client a month? Six? Add another line to your Income section and factor that in.

Review this every month, remembering that it takes a while for adverts to get some traction. Where are you now? Is it worth the additional cost?

That’s a quick run through of cash flow forecasting with a basic tool. If you are seriously committed to growing your business, then Your Local Bookkeeper highly recommends investing in software like Fathom to do so. Fathom links with your accounting software to forecast, scenario plan, create if this then that formulas and provide goals and targets for you to meet. If you’d like more information, then book in a discovery call with me today.

Kathryn has also provided a fabulous training in the Club explaining all this and more in detail.

Kathryn smiling broadly at the camera, she is outside with an ant hotel on the fence behind her.

Kathryn Frimond (she/her)

Kathryn is the owner of Your Local Bookkeeper, a small virtual bookkeeping practice based in Farnham, Surrey which helps small businesses manage their finances and grow.

She focuses mainly on purpose-led, sustainability driven businesses, offering a range of services from bookkeeping up to management accounts and advisory.

She’s also a mum of 1, wife, yogi, amateur gardener, crafter and napper.

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