Nothing wreaks havoc on Finance’s efficiency like a way-off cash flow forecast. Here’s an action plan that’ll banish expensive surprises.
If there’s one thing you can be certain of in this economy it’s that there’s no shortage of uncertainty. It can turn even the most reliable forecasts on their heads.
By now you’ve probably done the “what if” scenarios that could happen to your company during a downturn.
But can you predict how much cash will be coming in and going out at every step of the way should any of those scenarios play out?
A chance to revisit and refine
Try this: Come up with a system to forecast key line items individually. For example, have Accounts Payable come up with a way to compare what you’re paying now against the previous quarter to get your payables rate. (You can do the same with A/R, Payroll, etc.) That will give you the chance to refine your forecasting.
The key: Start with weekly forecasts. That way you can compare your predictions frequently against your actuals so you can adjust accordingly. Once you’re confident, you can go monthly.
Of course, remind staffers they’ll have to be ready to jump in and update as conditions change … especially in times like these. A major customer changes your terms and you’ll have to go back to the drawing board! But at least you’ll be ready for it.