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“Have I got enough money?” This is one of the most common questions that get asked. It’s a simple query, but the answer can be complex, especially for SME owners. Cashflow modelling can help to answer these difficult questions.

Business owners often face a number of challenges when it comes to their personal finances. With so much focus on their business, it’s perhaps unsurprising that many pay less attention to their own finances. They are also inclined to reinvest their wealth back into the business, instead of investing in their own financial future – perhaps in the form of a personal pension.

This means the line between business and personal wealth can become blurred, making it harder to identify if their assets will cover the cost of their retirement.

Cashflow modelling – forecast your future finances

To achieve the post-work lifestyle they aspire to, a business owner will need to think about what they want from their ‘later years’. They will also need a good understanding of how much money they will need to achieve their future objectives. This is where cashflow modelling can help: It allows us to forecast our clients’ future income, and highlights where they are on track with financial goals and where they aren’t.

To help build a picture of a business owner’s current and future finances, we use powerful cashflow modelling software to test different scenarios and life events to see how these might affect their income, identify trends and make realistic estimates about their future. This helps us to create a long-term projection of a client’s finances.

Understanding the cost of tomorrow can make a big difference to the decisions you make today. For example, Tilney’s experts use cashflow modelling to assist in measuring clients’ potential exposure to Inheritance Tax (IHT). Business assets do not form a part of a person’s estate for IHT purposes, but the proceeds of a business sale might. This can amount to many thousands of pounds, so the earlier you discuss how to mitigate this with your advisor, the more chances you have of reducing the liability in the future.

Make informed decisions

Cashflow modelling can help to answer those difficult ‘3am moment’ questions, such as ‘at what age can I expect to retire?’ or ‘will the sale of my business cover my retirement needs?’ It can also help business owners to gauge how much they would need to sell their business for in order to fund the retirement lifestyle they want. This is particularly relevant if the sale value of the business is likely to be lower than expected, as it may still be enough to fulfil their future needs.

Prevailing tax rates and reliefs are dependent on individual circumstances and are subject to change.

Find out more about cashflow modelling.

If you want to learn more about how cashflow modelling can help you, find and contact your local Haines Watts office.

Find and contact your local Haines Watts office

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