Question

What do you think is the most important aspect of cash forecasting; accuracy, thoroughness, providing the numbers management wants to hear, etc.)? Relate your thoughts to your personal cash fore cast and to a career as a Treasurer.

Answer 1

Cash flow is the lifeblood of all businesses particularly startups in small Enterprises. As a result essential that management forecast what is going to happen to cash flow to make sure the business has enough to survive. So in a business cash is King because it determines many important aspects such as identify potential shortfalls in cash balances in advance, spot problems with customer payments, as an important discipline of financial planning the cash flow forecast is an important management process similar to preparing business budget.

Does your business have enough cash to survive? Is the basic aspect cash flow planning and forecasting similarly if we relate cash forecasting and accuracy to a personal cash forecast we analyse do we have sufficient cash to survive a livelihood.

A cash forecast is a plan that shows how much money a business or a person aspects to receive in and payout over given period of time. The business will usually start by planning how much it expects to earn in sales then how much you expect to spend in day-to-day running fast and finally how much it expect to receive from other sources and pay for other cost. A cash flow forecast not much profit forecast because profit is based on when income is on and when costs are incurred.

When we analyse personal cash forecast we add total income and expenses and we have a personal cash flow statement. If our cash flow statement is positive then we have some additional cash each month that we can use to help to reach our financial goals such as build emergency fund, investment and paying out debt.

A personal cash flow statement measures your cash inflows and outflows in order to show you your net cash flow for a specific period of time.

The important aspect of cash forecasting is the past expenses that has been incurred the loans that are outstanding. Cash flow forecasting is important because if a business runs out of cash and is not able to obtain new finance it will become insolvent. As a result it is essential that management predicts what is going to happen to cash flow to make sure the business has sufficient funds to survive. How often management should forecast cash flow is dependent on financial security of business if the businesses is struggling or is keeping a watchful eye on its finances the business owners should be forecasting and revising cash flow on daily basis.

Here are the key reasons why a cash flow forecast is so important

1.Identify potential shortfalls in cash balances in advance.

2. Make sure that businesses can afford to pay suppliers and employees

3. What problems of customer payments preparing the forecast encourages the business to look at how quickly customers are paying their loans

4. As an important discipline of financial planning cash forecast is an important Management process

5. External stakeholders such as banks may require a regular forecast certainly in the business has a bank loan the bank will want to look at the cash flow forecast at regular intervals.

Cash forecasting is one of the most difficult get important aspect of financial planning its an important tool in predicting how much capital investment is needed and in making sure you have enough cash available throughout the year.

While forecasting cash there are few common errors people make such as under committing cash forecasting is a vital business rule as it requires much attention so it should be allotted sufficient time and resources it is generally not a good idea to delegate this task to junior level employees who might lack the understanding of company finances.

Overestimate in sales and and and lack of communication and lack of communication and and lack of communication and not obtaining and lack of communication and not updating enough should not done.

Cash projections cash projections are one of the most essential essential and and effective tools and and effective tools and Organisation can create sho and effective tools and Organisation can create so make sure this is at the top of the priority for a healthy Finance.