When you think about it, finance teams cannot exist on their own they are designed to support your company’s core functions – which in turn, cannot successfully exist without finance support. While cash flow management may require a more detailed analysis on a departmental level, the following high-level goals should drive your overall approach. Step 1: Fine-tune your overall cash forecasting goals. Next, we’ll discuss some key steps for your approach and considerations within each step. Taking these aspects into account, and understanding the impact they have on your decisions and financial forecasting process, is important in your approach to cash flow management. Does the company need to postpone payment of invoices, especially at year end? Is there enough liquidity to ensure vendor goodwill, which in and of itself is an intangible asset that could impact the cost of doing business and as such company’s cash flows? Is there enough cash on hand for payroll? And enough cash to pay interest on outstanding loans and assure covenants are fulfilled? If your company lacks the liquidity to cover these aspects, there can be a number of serious legal ramifications. In other words, what is your company’s ability to pay for the outflows with the inflows? This determination is critical across all business segments, and along with it come significant implications for your organization including:

At the heart of cash flow consulting is an understanding of the state of your business that is, liquidity versus solvency – and its impact on operations. Why is cash flow forecasting so critical to your business?įirst, the basics.

3 way cashflow forecast