Even if cash isn't the biggest worry at your company, setting up and maintaining a Cash Flow Forecast is the cornerstone of a modern reporting package. Sustainable growth is near impossible without it.
You should always be in a position to monitor your cash and model scenarios on how underlying assumptions such as a new hires, sales and budgets can impact your cash. Understanding whether or not plans are feasible is crucial to minimizing business risk.
Cash Flow is the lifeblood of any organization. It is critical that management can effectively forecast the current state of cash, so they can meet their short and long-term operational needs. So how does a company keep track of Cash Flow with so many underlying assumptions changing constantly?
The Challenges of Managing Cash Flow Forecasting
The fundamental problems in accurately managing Cash Flow Forecasting has not changed over the years but the complexity of evolving businesses have. 80% of our clients have encountered the following challenges when it comes to Cash Flow Forecasting:
- Disjointed processes
- Poor communication between departments (treasury, accounting, FP&A, management, etc.)
- Delayed visibility of Cash Flows
- Time-consuming to prepare, Cash Flow forecasts become irrelevant by the time it is completed
- Risk of errors
- Reporting may not align with actual management of cash accounts by treasury
In order to manage Cash Flow Forecasting effectively we need to ask ourselves the following questions:
What does Cash Flow Forecasting really mean to us and our organization?
How can accurate forecasting avoid potential pitfalls, reduce borrowing costs and invest excess cash in other strategic initiatives?
How can effective Cash Flow Forecasting drive our business success?
Is our current Cash Flow process ready to grow and change with our business?
How much time do we spend on our current process?
Why are we still using Excel to manage our Cash Flow Forecasting?
As you know for Cash Flow Forecasting, effective planning is critical when trying to keep up with cash obligations and changes in your daily operations. Long, manual reporting cycles can leave you well behind the competition as well as the demands of your customers, whose loyalty you don’t want to compromise. Effective Cash Flow Forecasting allows internal and external stakeholders to achieve their objectives in planning and allocating resources.
Introducing Limelight Cash Flow Forecasting
I recommend using Limelight for an integrated approach to speed up planning and reporting cycle times through the use of our latest technology for Cash Flow Forecasting. Construct your Cash Flow Forecast from your own financial and non-financial data to make intelligent decisions based on the latest data, using predictive modelling techniques and manual overrides for management adjustments.
Limelight’s Cash Flow Forecasting solution approaches the problem from the balance sheet planning perspective. You can simulate different scenarios in real time to effectively make business decisions and approach the problem with a holistic approach. The process starts with forecasting the balance sheet with accurate and real-time data using historical trends, financial ratios and management adjustment layers. Users no longer need to manually work backwards from the balance sheet to prepare a Cash Flow statement. In Limelight, the two statements are prepared in parallel, with the accuracy and data stakeholders need to get a complete view of their company’s financial health.
Limelight’s advanced features and functionality can yield the following benefits:
- Standardize your Cash Flow reporting through integrating financial statement preparation
- Better management of cash obligations
- Maximized yields on investments
- Intelligent inter-company cash allocation decisions
- Streamlined planning for future investments
- Improved financial governance and compliance
- Use dashboards/charts to show key metrics displayed in real time
As a cloud-based solution, Limelight is easy to deploy across your organization. It integrates with your data sources and uses the Excel features you and your team know and love.
To learn more about how you can implement Cash Flow Forecasting at your organization, watch our recorded webinar right now.