No business, irrespective of its size, can sustain itself without a healthy amount of cash in the bank.
Cash flow is the glue that holds together your real estate agency. Let it dry up and financial troubles will creep in. As an agency principal, cash flow forecasting should be part and parcel of running your business – not an annual exercise, but a monthly checkpoint that will help your agency stay in the black.
By the very nature of real estate industry means that those who operate within the industry are forced to deal with frustrating delays in income with a wait for commission. Whilst much of this cash flow uncertainty can be eliminated with a flexible commission advance service, there’s still plenty you can do yourself when it comes to accurate cash flow forecasting.
Here are our tips on successful cash flow forecasting for your agency:
Create a cash flow plan and budget
Cash flow can be unpredictable and seasonal; therefore it’s imperative that you develop a cash flow plan and business budget. This will help you forecast revenue and expenses so that you will become aware of any potential issues before they arise.
Planning ahead also provides you with an opportunity to make more informed financial decisions. If you are across your finances, you will be able to ascertain quickly whether you can afford things like extra staff and new equipment.
However, despite your best efforts in planning and forecasting, unexpected things will always crop up. Therefore all business owners should have a cash-contingency plan in place for those unexpected hurdles.
Know your ingoings and outgoings
As an agency principal, you need to be aware of both your ingoings and outgoings at all times. It’s easy to become complacent and let the small expenses slip under the radar, but they all add up and fast. If you aren’t across and properly recording all your business expenses, you have no way of knowing how you are tracking to budget.
Continually reviewing and assessing your overheads and fixed costs, such as rent and utilities can also reveal unexpected ways to save. By keeping a close eye on your expenses, you can easily pinpoint and remove any unnecessary cost.
Plan for different revenue outcomes
Because cash flow forecasting is essentially a guessing game, you will never know for sure what your real estate sales will be over the coming months, quarter or year. We recommend that you plan for several different scenarios. A most likely scenario, a ‘best case’ and a ‘worst case’ scenario. With your best and worst case options in mind, we suggest about 25% higher and lower than your likely scenario.
Be realistic about your agency’s position
Be as objective as you possibly can be about your agency’s projections. It may even pay off to be more on the conservative side with your cash flow forecasts. Forecasting a 75% increase in property sales might be possible, but is it realistic?
Replace Stone Age software
Any opportunity to streamline your business should be grasped with both hands. This means, taking a look at your administrative processes and giving them a technology facelift. There is a huge range of technology tools available for real estate agencies now that can assist with every facet of your operations, from communication and marketing to payments. Look at what it is that you need help with most, and source the best tech tools that suits your needs. It may cost a little to run, but these small expenses will be worth it in the time it saves you.
Using tech to simplify your processes doesn’t just make your life easier, it also means you can devote your precious time to other things that will help maintain a steady cash flow, such as new business acquisition, customer service and managing your team.
Maintaining a healthy cash flow and bottom line is as much about managing the money once you have it, as it is about securing the cash in the first place. Having complete visibility of your business and sufficient cash in the bank will help take care of your business during difficult times, so you can rest easy at night.
Commission Loans simply give you peace of mind and liquidity when you need it. If you think your agency could benefit from a commission loan arrangement, give our team a call on 1800 003 569.
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