The management of cash is a key priority for all business owners/managers. It is fundamental to the success or failure of the business. However, in our experience it is not unusual for there to be significant gaps in business owners’ knowledge of future cashflow requirements. This is where a robust cashflow model can help.
The Benefits
1. Learn more about the business. Preparing a cashflow forecast forces management to consider what the key cash drivers are thereby identifying where there are opportunities to make improvements.
2. A cashflow forecast helps identify at an early stage where there are potential funding gaps. Funding options can then be considered at an early stage rather than at the last minute – which tends to be more expensive!
3. Robust forecasting allows management to be more in control of the ongoing cash position. This allows management time to be focused on more productive areas of the business rather than day to day cashflow firefighting.
4. Robust forecasts allow appropriate cash collection targets to be set and responsibility to be delegated in order to positively motivate credit control staff.
5. Being in control of cash management ensures that payment promises made to suppliers are met. This is very important in maintaining credit terms with key suppliers.
6. Forecasts provide a basis on which actual performance can be compared and plans put in place to mitigate any variances. It is important that the forecasts are updated on a regular basis so that they remain a valuable tool.
7. Cashflow forecasts allow a proper assessment of capital expenditure projects and potential acquisitions.
Shorts have a team of experts who have significant experience in preparing integrated financial forecasts for clients of many sizes and in many sectors. We are always happy to provide advice on the most cost effective ways to implement a robust cashflow forecasting process. Please contact Adam Ames or a member of the team for further advice.
Adam Ames
View my articlesTags: Corporate Finance
