Cash Flow Forecasting for Sole Traders and Contractors

Great expense apps if you’re self employed

expense apps for self employed people
Are you busy and self-employed but can’t afford the higher price tag of some expense tracking apps? Don’t worry, there are cheaper options available.

AS WE’VE WRITTEN PREVIOUSLY, cash flow is one of the most accurate instruments for predicting your business’s financial health. It’s more accurate than profit and loss statements, which don’t take into account any cash outlays, and so don’t show a true picture of your business’s finances.

We have also checked out some of the latest cash flow forecasting apps that integrate with Xero and other accounting packages. These can be excellent tools for businesses that employ staff or are expanding rapidly, but there are still many business owners that don’t fit into that category, and although keeping an eye on their cash flow and forecasting trends remains critical to their financial health, they can’t justify the high price tag of an app like Spotlight or Float.

Expense and budgeting apps

What’s a cash flow app, if not a program that tracks your expenses and income and then tells you how much money you have left in the bank? That’s what FUTRLI and Spotlight, the apps we reviewed recently would do, and then also let you do other things, like create scenarios to determine the particular outcome of a business decision.

But there are other expense apps that sole traders and contractors can use for cash flow forecasting:

Pocketbook

Pocketbook, the Australian personal finances app recently acquired by ASX-listed ZipMoney, is free to use, although a recent deal with 1300HomeLoans means it may analyse your spending data to make commercial suggestions around your personal finances. (For the record, I have been testing it for months and hasn’t been subject to any such suggestions.)

Pocketbook lets you connect your bank account to the app so it can import your income and transaction data. Once you get some initial housekeeping — categorising your expenses and income — out of the way, you can then set up a safety spend limit based on Pocketbook’s analysis of your spending vs. income.

Pocketbook also learns from your transaction history, meaning it can predict upcoming income and bills. It’s very nifty for contractors or freelancers who have more than one income source that doesn’t always run through your accounting software — if you’re working on your TFN and ABN, for instance.

TrackMySpend

TrackMySpend expense apps for Xero online training courseThis free app, by ASIC MoneySmart, lets you connect your bank account to the app, categorise your expenses, nominate a spending limit, and create expense reminders that can be sent to as text messages ahead of their due date.

Like Pocketbook (but without the commercial overtones), TrackMySpend will also learn from previous trends in your income and expense data to predict future income and expenses. Best of all, TrackMySpend can be exported as an Excel file or connected to your accounting software. The iOS app is a bit out of date, though, so it won’t work on more recent Apple devices.

ATO

ato_mobile_app for Xero online training course videosIf you didn’t know it already, the Australian Tax Office has its own mobile app. It allows you to access the ATO’s online services, lodge and track your tax return (yes, right from your mobile phone), work out key tax dates and access tools and calculators.

Its most handy functions: being able to enter your expenses (including a photo of receipts and bills), track mileage, and record your income. It’s not automated, but it does propagate that info directly into your tax return, so you don’t have to do it later. It also accurately calculates your tax liabilities.

The ATO app’s best function, however, is its “business performance calculator”, which, using the data you input, will give you an indication of your business’s ability to pay its debts, as well as a comparison of its performance based on the ATO’s “small business benchmarks” data. Over time, it’ll also show whether your business has improved or declined since you last used the tool.

Understanding your business’s cash flow is critical to its ongoing financial health, and to your ability to make sound business decisions. Use one of these tools in conjunction with your accounting software to ensure your business is running on all cylinders.

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Our Xero training courses, which provide training in EVERY LEVEL for ONE LOW COST, will show you how to run financial reports, including cash flow statements that you can use to create forecasts in Excel. Visit our website for more information about our online training courses.


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Cash Flow Forecasting and Reporting Apps for Xero

Do you know how happy your business is?

running cashflow reports in xero and exporting to excel
Cash flow is THE key indicator of your business’ health and happiness so it pays to know the tools that will help you run regular cash flow reports.

AS WE’VE WRITTEN NUMEROUS times before, cash flow is the best indicator of financial health. A cash flow report takes into account the money you have in the bank after you’ve paid all your suppliers, employees, made your loan repayments.

Cash flow represents money in the bank

If, after paying your suppliers, employees, making loan repayments, cash outlays, and so forth, you don’t have any money in the bank (or you can’t make all of your obligations) this is negative cash flow.

Negative cash flow indicates a problem. There’s either a failing in one or more of your processes — your credit management procedures, for instance — or you’re simply spending more money than you’re making.

Cash flow forecasting is critical

You can create a cash flow forecast report in Xero by running a number of cash flow reports and importing them into Excel for analysis. (We’ve written before about how to link a financial forecast created in Excel with your Xero accounting information.) Linking the two in this way is a highly customisable method for seeing what you’re spending your money on, and when. You’ll also be able to track your clients’ payment patterns, so you can put processes in place to speed up the time it takes to get paid.

Forecasting and reporting apps

This Xero-Excel method for creating a cash flow forecast report can be time consuming, however. It also requires a good knowledge of Excel so you can set up formulas that will allow you to forecast 12 months ahead. 

For smaller businesses or sole traders — or even large businesses that just want to glance quickly at their cash flow — a dedicated cash flow app is a good way to track and forecast your business’s cash flow — and in real time. In our last blog we covered some of our favourite expense apps and why we like them.

Float

Float expense tracking app logoAt $79 a month for a basic (or “medium”) plan, Float is on the pricier end of cash flow apps, but its many features — in particular, the ability to create “scenarios” that allow you to determine the outcome of a particular business decision, such as employing two staff members instead of one — make up for it.

Float quickly learns trends in your business and will be able to anticpate upcoming payments, bills, etc. It also integrates with Xero, QuickBooks and even FreeAgent, the free cloud-based accounting app for small businesses.

FUTRLI

Futrli Expense App logoFormerly known as CrunchBoards, this British app, which has expanded into Australia and the U.S., features predictive alerts, KPI dashboards, tax forecasting (so you can accurately estimate your tax bill), trend indicators, forecasts for the next ten years (if you want), scenario planning, and a heap more.

It doesn’t, however, learn from your business, so it can’t predict upcoming payments and bills. FUTRLI will set you back $59 a month, regardless of whether you’re a startup, growing business or established enterprise. It integrates with Xero and QuickBooks.

Spotlight

Spotlight_Reporting-logoA lot simpler than FUTRLI, but with fewer features (although you could argue, it’s a spotlight on the *only* features you need), Spotlight will let you import all your budget data, create scenarios, and create KPIs for your business, making forecast reporting a cinch, but it doesn’t learn from your business.

This means it can’t anticipate upcoming payments from clients or bills coming due, leaving you to create forecasts based on past trends, rather than upcoming ones. Spotlight integrates with Xero.

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Understanding your business’s cash flow is critical to its ongoing financial health, and to your ability to make sound business decisions. Our Xero training courses will show you how to run financial reports, including cash flow statements that you can use to create forecasts in Excel. Visit our website for more information.


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