Financial planning & analysis is one of the 10 most important areas of responsibility for CFOs.
Cash flow forecast accuracy is one of the ten most important KPIs for FP&A teams.
Here are 6 ways for CFOs to improve cash flow forecast accuracy ๐งต.
Cash flow forecast accuracy is one of the ten most important KPIs for FP&A teams.
Here are 6 ways for CFOs to improve cash flow forecast accuracy ๐งต.
First an overview of the six ways to improve cash flow forecast accuracy:
1. Data quality
2. 13-week rolling forecast
3. Historical patterns
4. Collaboration
5. Cash flow drivers
6. Scenario analysis
1. Data quality
2. 13-week rolling forecast
3. Historical patterns
4. Collaboration
5. Cash flow drivers
6. Scenario analysis
1/6 Data quality
Implement robust data collection and validation procedures to minimize errors and inconsistencies.
Regularly review and cleanse the data to ensure accuracy. Utilize automated systems and tools to streamline data aggregation and analysis.
Implement robust data collection and validation procedures to minimize errors and inconsistencies.
Regularly review and cleanse the data to ensure accuracy. Utilize automated systems and tools to streamline data aggregation and analysis.
2/6 13-week rolling forecast
Update the forecasts regularly throughout the year to reflect the latest information.
Use actual cash flow data and adjust projections based on evolving circumstances.
This will provide more agility and accuracy in capturing cash flow dynamics.
Update the forecasts regularly throughout the year to reflect the latest information.
Use actual cash flow data and adjust projections based on evolving circumstances.
This will provide more agility and accuracy in capturing cash flow dynamics.
3/6 Historical patterns
Analyze historical cash flow data to identify patterns and trends.
Consider seasonal variations, cyclical patterns, and other factors that influence cash flow.
Incorporate these insights into the forecast models to improve accuracy.
Analyze historical cash flow data to identify patterns and trends.
Consider seasonal variations, cyclical patterns, and other factors that influence cash flow.
Incorporate these insights into the forecast models to improve accuracy.
4/6 Collaboration
Engage with sales, procurement, and finance teams to gather input and insights.
Understand their operational plans, revenue forecasts, etc. to align with their expectations.
Continue to communicate to stay updated on changes that impact cash flow.
Engage with sales, procurement, and finance teams to gather input and insights.
Understand their operational plans, revenue forecasts, etc. to align with their expectations.
Continue to communicate to stay updated on changes that impact cash flow.
5/6 Cash flow drivers
These drivers may include accounts receivable, accounts payable, inventory levels, capital expenditures, and debt service.
Track and analyze these drivers to assess their impact on cash flow.
Implement dashboards that provide continuous visibility.
These drivers may include accounts receivable, accounts payable, inventory levels, capital expenditures, and debt service.
Track and analyze these drivers to assess their impact on cash flow.
Implement dashboards that provide continuous visibility.
6/6 Scenario analysis
Develop best-case and worst-case scenarios based on different assumptions and market conditions.
Evaluate the sensitivity of cash flow to changes in different variables.
Scenario analysis helps anticipate cash flow risks and enables mitigation strategies.
Develop best-case and worst-case scenarios based on different assumptions and market conditions.
Evaluate the sensitivity of cash flow to changes in different variables.
Scenario analysis helps anticipate cash flow risks and enables mitigation strategies.
What do you think of these 6 ways to improve cash flow forecast accuracy?
What would you add and anything you'd do differently?
Let's help all CFOs and finance teams out there improve cash flow forecast accuracy!
What would you add and anything you'd do differently?
Let's help all CFOs and finance teams out there improve cash flow forecast accuracy!
That's a wrap!
If you enjoyed this thread:
1. Follow me @LiuLindberg for more of these
2. RT this tweet to help CFOs be better at forecasting cash flows.
If you enjoyed this thread:
1. Follow me @LiuLindberg for more of these
2. RT this tweet to help CFOs be better at forecasting cash flows.
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