If you are in a "cash bind" or other financial crisis, you need to pay close attention to your cash position. Look primarily at the monetary assets and liabilities. Monetary assets are cash and those assets that you can turn into a specified amount of money. Monetary liabilities are liabilities requiring the payment of a specified amount of money - most liabilities are monetary. You can estimate how much cash is coming in from payments on accounts receivable and cash sales and how much cash you must disburse for payroll, current invoices, and accounts payable.
It is a sad fact that most businesses that fail do not do so because they cannot sell their products or services. The most common reason for business failure is poor cashflow - simply more money going out than coming in. Overtrading is the second most common cause of business failure and is strongly linked to cashflow. This happens when a company tries to sell more products that it has the funds to make, i.e. "biting off more than you can chew". The message is that cashflow is critical to business success.
If you have an ample cash flow, you still need to examine the situation. For example, you may have more in your bank current account than you need. If so, you may consider moving some of it to a deposit account or other place where it will earn a good return. Some investment institutions automatically transfer your excess cash from a current account to an investment earning a higher return.
In examining the cash position, remember that the bank's records probably show that you have more cash than your Cash account shows. You make a credit to Cash on the day you write and post the cheque, but the bank only reduces your cash balance when the check deposited by the recipient clears through the banking system. This process takes a few days, sometimes longer if suppliers or employees are slow in depositing your cheques.
As a result, forecasting your future cash position may indicate that you should think about obtaining more cash - by borrowing, or by reducing your expenses - or that you likely have unneeded cash, which you should invest in some instrument that earns a return.