A flexible approach to cashflow forecasting

Light in the dark

The impact of poor cashflow can be significant, whether you’re an early-stage startup or an established family business. So it’s vitally important to record, track and monitor your cash position across all time periods – whether it’s one week in the future, or a year down the line.

The kinds of cashflow challenges you’ll experience can be seasonal, hard to predict and difficult to plan for. So being able to run cashflow forecasts that cover the short, medium and long-term view of your finances is essential for you to get the whole picture of your potential future financial position.

So let’s look at how forecasting across a range of time periods helps you fill in your cashflow blind spots and see exactly what’s coming down the cash highway.

What timeframes should you be forecasting?

To cover the entire range of cashflow possibilities, it’s important that you understand the short, medium and long-term future of your cash inflows and cash outflows.

It’s only by focusing in on the right timescales that you’ll get the best combination of ‘drilled-down detail’ and ‘bigger picture insight’. To this end, it’s common practice to run forecasts around these three key timeframes:

  1. Daily – to see review any short-term cash issues
  2. Weekly – to keep tabs on the medium-term cash outlook
  3. Monthly – to provide a proper long-term vision of your financial future.

Let’s take a look at each of these timeframes in more detail, to see where flexing between micro and macro views helps keep you in complete control of cashflow.

Daily cash forecast

Daily cash forecasts give you an exceptionally granular view of cash coming in and expenditure going, so you can manage short-term liquidity issues (such as a large bill going out in the same week that your cash is at an all-time low).

You may want to assign specific dates to many cash movements, but if you’re managing cashflow effectively then daily cashflow forecasting shouldn’t be needed on a regular basis.

Exceptions where daily forecasting might be needed will include situations during the year where cash is tight, seasonality in your market or trying to minimise the cost of financing – for example, if you’re using invoice financing as a quick fix to ongoing cash issues.

Weekly cash forecast

Weekly cash forecasting is essential to running a successful business. It’s your radar for navigating the financial future of the company and spotting any issues that may lie ahead along the planned route map for the business.

A weekly forecast will usually be done using a 13-week forecasting template. This gives you a medium-term view of your cash position, and can be helpful when monitoring any regular monthly or quarterly inflows and outflows – for example, being confident that you have the cash for this month’s payroll run, or to pay your office rent for the month.

Monthly cash forecast

Monthly cash forecasts are more macro in their focus, allowing you to stand back and see the wider picture of the company’s cash over the coming year, or longer.

Using this monthly template is ideal for monitoring a 12 or even 18-month period in the one forecast, giving you a long-term overview of the company’s cash position over the year and beyond – and helping you keep the company on course.

This is invaluable for two key reasons.

  • It helps to inform big business decisions – so you have better insights before taking on new hires or signing up to any big contracts etc.
  • It helps with budgeting and scenario-planning – helping to guide your thinking when it comes to strategy and key targets in your annual budget.

The value of flexible forecasting tools

Although it’s helpful to be able to apply these three distinct windows of time to your cashflow forecasting, there will almost certainly be occasions when you want to zoom in and out between the short, medium and longer-term views – so your cashflow forecasting tool must allow you to do this without running new separate reports.

With data-driven forecasting apps, such as Fluidly, your forecasts are drawn from the same source financial data – so it’s incredibly easy to change your timeframe and move from micro to macro views of the liquidity of the cash in the business.

Having this intelligent cashflow engine at the heart of your forecasts also helps you to get smart alerts, notifications of any perceived cash threats that are flagged up in your forecasts and reminders of the key debtors to chase – giving you the ability to move your cashflow from a theoretical data report into a set of clear actionable steps – steps you can execute on to maintain your positive cash position

The flexible way to smart cashflow forecasting

Fluidly gives you the granular cash detail you need, while also providing the big picture view (and actionable alerts) needed to keep your cashflow looking stable.

Find out more about Fluidly’s intelligent cashflow engine.