Why every business needs to create weekly cash flow forecasts

The benefits of weekly cash flow forecasting are as follows:

• Answers ‘What if’ questions through scenario planning:

  Scenarios are a valuable weapon in the strategist’s arsenal. They are especially beneficial in building methods for navigating the types of extraordinary events that have lately occurred in the global economy.

  Scenario planning is highly beneficial in automated cash flow forecasting. Due to the manual operations necessary, organizations frequently lack the resources to develop customized forecasts.

  The capacity to swiftly develop and generate tailored projections enables firms to predict the impact of decisions and the potential value of investments before making them. Scenario planning can be utilized to address all of your team’s “What if” queries, which are:

  • What if creditors and employees are not paid on time?
  • What if there is a recession or change in interest rates?
  • What if the customers pay very late?

  These concerns can be answered by running such scenarios and observing the effects on the company’s cash flow over time. Late payments from customers and clients may significantly impact cash flows. Modeling alternative scenarios, on the other hand, can assist firms in comprehending their future objectives, potential outcomes, and how various events will affect their cash inflows.

• Identifies and plans for cash shortages:

  A successful cash flow forecasting procedure can be critical to a company’s success. In times of uncertainty, an organization’s capacity to handle considerable volatility can drive long-term financial health.

  A cash flow forecasting model provides an early warning sign of a company’s future business health by examining cash balances under several future scenarios. With an accurate cash flow forecast, a company can foresee future cash shortfalls and minimize missing payments.

  Cash flow forecasts give firms the foresight to execute corrective actions such as fine-tuning payment and collection procedures, liquidating assets, or approaching lenders. Forecasts can help foresee a surplus or lessen the impact of a cash deficit.

• Allocates cash surplus appropriately:

  Businesses rarely profit from having a large amount of idle cash on hand. Forecasts can assist in identifying prospective surpluses and allowing cash managers to deploy extra cash properly.

  Businesses must create cash flow forecasts and put additional capital to work, whether investing or utilizing excess cash to gain a competitive edge. Scenario planning assists firms in estimating the impact of specific investments or actions as they look to allocate spare capital.

  Excess cash in the bank is uncommon for many organizations, but using extra cash for reinvestment in new markets or debt repayment can be critical to maintaining actual cash flow.

• Lowers the cost of capital:

  A corporation can minimize borrowing to meet intermediate obligations such as payroll and rent by knowing liquidity. In other circumstances, a company might lower its cash holdings and instead deploy the capital through reinvestment in the business, debt reduction, or dividends.

• Manages FX risk:

  An accurate strategy of forecasting cash flow is essential for controlling and limiting the risk associated with foreign currency. Forecasts enable cash managers and treasurers to forecast cash requirements and minimize the need for foreign currency transactions.

  The primary responsibility of the treasury manager is to ensure that the company has enough liquidity to allow the operational units to function. When forecasting potential cash surpluses and deficits, it is vital to consider quantities and currencies and the periods over which the surpluses or shortages will occur. Forecasting cash flows weekly assists firms in better understanding their exposures and developing a plan to mitigate FX risk.

• Oversees seasonality:

  Many companies are affected by seasonality. Seasonality is challenging because each firm has different peak and low sales periods. With seasonality, financial shortfalls might become more probable.

  Instead of dealing with these gaps when they arise, a weekly cash flow forecast helps identify them before they have any impact on the business. A weekly cash flow forecast predicts when cash outflows and cash receipts will be more significant or lower, allowing for better management of the company’s working capital needs.

  Understanding the company’s seasonality and the average level of cash reserves guarantees how to prevent catastrophic cash shortages and manage working capital demands all year.

• Improves collaboration with other departments:

  To create a cash flow forecast correctly, the finance team must communicate with colleagues in sales, accounts payable, accounts receivable, human resources, and other departments.

  It compels financial forecasting professionals to have a more comprehensive grasp of the business and how it runs.

It’s simple to build a cash flow model with this free cash flow forecasting template. With this template, users can use these free, ready-to-use excel templates to make it easy for treasury professionals to plan proactively, record, and manage the company’s cash. It allows users to compare daily, weekly, and monthly expected cash revenues and payments to the operational expenditures and other outflows.

What does it consist of?

It includes the following free and ready-to-use forecasting templates in Excel format to help treasury professionals smooth out and expedite the process of forecasting cash across various time horizons: 

• Daily 
• Weekly
• Monthly 
• 13-Week Rolling

Benefits with HighRadius cash forecasting template

• Understand the implications of future goals and potential results
• Create a number of scenarios
• Estimate and prepare for any cash shortages and surpluses
• Anticipate the effects of future changes
• Prevent cash flow shortages

How should cash flow forecasting templates be used?

Simply enter the beginning balance as well as the amounts for all cash receipts and cash payments. 

Still, want to learn more about forecasting cash flows weekly with automation? All you have to do is talk to our experts.