| 29-06-2020 | Cashforce
Cash flow forecasting has been called many things in literature. Ranging from the cornerstone of a finance & treasury department to the lifeblood of any organization; it’s fair to say cash forecasting is vital to get an accurate prediction of an organization’s health. Cash forecasting, at its core, is simply identifying all the various in & outflows over a given period in order to analyze and compare those estimations with your actuals. However, in reality, it’s not that simple and a lot of challenges arise in getting an acceptable end result, especially when complexity increases i.e. multiple systems, entities, currencies, etc. Additionally, it doesn’t stop at regularly getting the right information in a timely and efficient matter. Setting sensible assumptions and providing contingencies that offer flexibility in case of unexpected events are a few quintessential things to consider. Improving your forecasting results is more than relying on hard data, but bears fruit in the synergy of art and science. Don’t know where to start, or how to fill in the blanks on further optimizing your current process? Then follow this checklist.
1. Set your goals & requirements – getting to the why – decide:
- Why are you creating a cash forecast?
- Do you want to perform an indirect or a direct cash forecast e.g. focus on short term (direct) or longer-term (indirect), or a combination of both
- What does successful (output look like? (formats, visuals…)
- If you would like to combine both, choose how the reconciliation would work?
- What level of granularity do you need?
- What KPI’s will you be measuring?