Cash flow forecasting software is an efficient tool gaining increasing popularity among enterprises from all over the world. What is it, and what can you do to fully benefit from its potential? Read our article to discover how to improve cash flow forecasting software!
What is cash flow forecasting?
Cash flow forecasting software is a cutting-edge solution that allows companies to store necessary financial information in one place. Thanks to such tools, it’s possible to automate certain processes within the organization, make reliable predictions, set key performance indicators, and observe the financial situation in real time.
How to forecast cash flow?
There are many ways to forecast the cash flow. However, the most recommended and wiser approach for your running business mainly leans on the business objectives or goals. Also, the requirements of your management team/ investors and the clear available information also matters. Following are the best ways to forecast the cash flow.
Find out Your Forecasting Objective:: As a rule of thumb many alliance and organizations use the cash flow forecast from short-term liquidity planning, interest and debt reduction, covenant and key date visibility, liquidity risk management ,and growth planning
Pick up Your Forecasting Period: Short-period forecasts, medium-period forecast, long-period, forecasts, mixed-period forecasts
Adopt a Forecasting Method: Mainly there are two types , direct and indirect
Source the Data You Need for Your Cash Flow Forecast: sourcing the data for proper cash flow forecast is a careful step. Mainly you can find the precise cash flow data in bank accounts, account receivable, account payable and also the accounting software that you’re using
How to improve cash flow forecasting? 5 tips
Making a strategic approach for cash forecasting isn’t enough at times. Besides the upgrading or improving also make sure the smartness in the on-going work. So, what is meant by cash flow forecast is the possibility to make informed decisions and set expected budgets based on actual data. All these with the use of an intuitive tool for scenario planning.
You can improve your cash flow forecasting in five simple steps:
- Come up with a list of fixed costs and other expenditures planned for the year to create cash flow projections. Think about processes and activities that can be implemented to cut your expenses or boost the budget.
- Monitor your cash inflows to keep your finger on the pulse and ensure that you receive all due money. Thanks to it, you’ll minimize the use of your line of credit.
- Make sure that you don’t spend more than you actually have.
- Automate tasks and processes to fully use the potential of your employees and to allow them to expand their skills.
- Analyze available data and watch the numbers to make the right decisions and to tailor your strategy to the condition of your company throughout the year.
Cash flow forecasting is an effective way to optimize your business activities and automate mundane processes that used to be performed by human specialists.