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Making the Move: Cash Flow Forecasting Tips for Turbulent Times

June 28, 2022
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cash flow forecasting

Call it a recession, a weak economy, or just “tough times”. The fact is there is great potential for turbulent times ahead for many small and mid-sized businesses. With less cash to count on, knowing your cash flow position with cash flow forecasting has never been more important: how much is really in the bank, how much is available on short notice, what revenues are coming in when, and what resources are going out and when. Managing your cash flow as tightly as possible is perhaps the most important tool you have to withstand the down economy and come out on the other side intact and poised for growth.Cash is the lifeblood of your organization, and the Statement of Cash Flows is the barometer by which management, lenders and investors measure the strength of your cash flow. Your ability to produce accurate and timely cash flow statements, and to perform analysis based on those accurate and up-to-date reports, is highly critical for assessing both the current health of your organization and making key business decisions. Knowing the timing, amount and predictability of future cash flows with cash flow forecasting should be an essential component of the budgeting and planning process at all companies – not just high-growth and highly leveraged companies – in a weak economy.

Why Accurate Cash Flow Reports Don't Come Easy

Generating accurate, timely, and dynamic cash flow reports is typically difficult for most CFOs and companies due to the cumbersome nature of most companies' planning, forecasting and reporting processes as well as the limitation in most software tools and applications that are available and in use today. We examine the reasons below.

No Link Between Cash Flow Analysis and Critical Business Decision

Balance Sheet reporting is too high level. Detailed insight on the critical elements of your cash flow analysis is usually not readily available to the cash flow analyst so this limits a thorough, accurate understanding of the planned or forecasted cash position of a company.Why this matters: For many small to medium growth companies, a major challenge is analyzing the cash impact for a typical product life cycle. For example, determining the cash flow dynamics of a software product – what is the impact on cash flow during initial Research & Development? While the product is being created and launched? What is the cash flow when a product is sold? How will your company fund growth with equity or debt? For most small to medium sized companies the management of cash inflows and outflows is critical. Your company may have limited resources for borrowing capital quickly. An accurate cash flow statement developed during the plan or the cash flow forecasting process can serve as an alert mechanism for any future problems caused by an unfavorable cash position.

Planning for Cash Flow at the 11th Hour

Although the importance, virtues, and critical nature of accurate cash flow reporting and analysis are highlighted by CFOs and executives in most companies, the development of cash flow plans and forecasts may not receive the same attention as other areas of the business.Why this matters: For planning and forecasting, the development and analysis of cash flow is typically performed at the tail-end of these processes. Most effort - 90-95% - of planning and forecasting focuses on the income statement. Planning for balance sheet items, and resulting cash flow analysis, is left for the “last day” or eleventh hour. Typically, cash flow synchronization with the income statement and balance sheet is quickly performed by one person just prior to the sign-off on the plan. Often the Balance Sheet is built at “50,000 feet” - the less precise the Balance Sheet, the less precise the Cash Flow. Ironically, cash flow development and analysis is almost an afterthought of this process, even though its use is highly critical to making key strategic decisions.

Dynamic Cash Flow Is Unsupported in Most Budgeting & Planning Software

You have many options in financial planning software for developing and calculating cash flow reports and analysis such as:

  • Spreadsheets
  • ERP systems
  • Business Performance Management (BPM) solutions
  • Cash flow point solutions/applications
  • Best-in-class planning applications

Most, however do not provide the required capabilities for driving timely, accurate, and, most importantly, dynamic cash flow analysis:Common limitations:No Financial Statement Integration: a dynamic link between all key financial statements (profit & loss, balance sheet, and cash flow) usually does not exist or requires extensive development time for most budgeting and planning tools.Limited What-If Analysis: the ability to explore the financial consequences of alternative business growth and funding strategies is critical, especially in fluid or volatile markets. But, this type of what-if-analysis isn't possible within spreadsheet budgeting. Quickly making a percentage adjustment on a group of data to drive a different cash flow scenario becomes a large and often imprecise task.Limited Versioning Support: developing and maintaining multiple cash flow versions for comparative analysis and business diagnostics is complex and time consuming within most applications. Many software systems fail to effectively provide versioning capabilities for storing and reporting more than a single version of a cash flow analysis.

The Challenge You Face: What technology is best suited for your cash flow forecasting needs?

The challenge for most companies in developing accurate and timely cash flow plans, reports, and analysis is the limited availability of “intelligent” software for supporting this effort. This lack of viable software has ensured that spreadsheet technology remains the go to method for developing cash flow models and statements, resulting in slow and manual financial processes across the board. Here are your software and application options for cash flow planning and cash flow forecasting:

Cash Flow Forecasting with Planning Maestro

Centageʼs Planning Maestro is a modern, cloud platform for planning and analytics that transforms how companies budget, forecast, and report performance. Centage eliminates the time consuming and error-prone activities associated with using spreadsheets and delivers sophisticated financial intelligence that can be implemented quickly and at an affordable price to small and mid-sized companies. With a direct line of sight into the organizationʼs financial health, Centage clients can react quickly to market changes, take intelligent risks, and capitalize on new opportunities. Centage serves more than 10,000 users worldwide.Key advantages:

  • Complete Financial Statement Integration - including automatic generation of income statement, balance sheet, and statement of cash-flows with each single entry
  • Dynamic Drivers - any changes in the budget/plan are automatically updated in real time to provide dynamic updates to the cash-flow statement
  • Drill-Down - “drill-down” from a high-level summary cash-flow statement to view the underlying components that make up cash from operations, investments, and financing
  • What-If Capabilities - enable your business to explore different scenarios, in real-time, and generate a new set of financial statements for comparative analysis to make insightful strategic decisions
  • Budget and Forecast Integration - rest assured that your company's cash-flow is not only highly predictive and accurate, but also synchronizes with the overall strategy of the company
  • Workforce Planning - control your expenses across different operational centers, adjust payroll numbers on the fly, and budget at an individual level to see the cash-flow implications of each employee's taxes and benefits
  • Capital Asset Planning - enable your business to forecast capital asset purchases and depreciation/amortization on a detail or aggregate level with ease

Why A Best-In-Class Solution Is Critical In Today's Market

Times are changing…again. What were once afterthoughts - like cash flow forecasting and capital consumption rates - are now at the forefront of your business. Most businesses are no longer in growth mode but instead looking to simply survive. Navigating today's market requires more from business leaders than ever before.Recession Protection -Economic downturns require small and mid-sized companies to display an even sharper vision of their cash flow position at any given time. Planning Maestro enables comprehensive and accurate understanding of your revenue, expenses, personnel and assets, in real time. With better information comes a better view of the current health of the company, as well as the short- and long-term health forecasts, so CFOs can better contribute to strategic and operational decisions.Competitive Advantage -Growth oriented companies look to improve the bottom line, while capitalizing on every opportunity to understand its market more thoroughly. Planning Maestro enables tighter control of overall financial health, drilling down to help CFOs spot problems and take corrective action. It provides built-in financial intelligence and business rules ensuring absolute data integrity. Opportunities are better and more quickly realized, positively impacting pricing, costs, market share, profitability and growth.Complementary To Your Core Erp/Accounting System -By taking advantage of a purpose-built planning application, companies can avoid cash flow plans or forecasts that provide disconnected estimates, having no real link with the rest of the financial statements. The built-in financial intelligence within Planning Maestro enables organizations to easily drive best practices as they relate to cash flow planning.Greater Collaboration -As an organization grows, managers need access to a drill-down understanding of their departments and corporate goals; actionable information with which to make the best decisions. Through tight integration provided by Planning Maestro, not only is a companyʼs cash flow model synchronized with the overall plan and forecast strategy, but leads to greater collaboration among all users involved with the planning process.


A growth oriented organization requires the financial tools to make fast and accurate decisions based on the best data. Planning Maestro is affordable, quick-to-implement, and 100% scalable to help take your business to the next level. Even better, it includes enterprise functionality at the small-to-midsize business price point. Working within any G/L structure, Planning Maestro provides a thorough, effective, technologically advanced solution which makes budgeting, reporting, forecasting and cash flow forecasting and analysis simple, accurate and available at your command.

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