This approach ensures detailed visibility where it matters most.

For example, a forecast spanning six weeks in total could contain two weeks of a daily cash flows and four weeks of weekly cash flows.

Mixed period forecasts involve a combination of time periods.

The benefits of a long term forecast need to be balanced against the dependability of forecasts overВ a long period of time.

Longer term forecasts such as a 12 month forecast is often the starting point for a budgeting process and is an important tool for assessing the cash required for longer term growth strategies and capital projects.

The 13 week period is important as it gives a quarterly view for each submission.

Medium term forecasts such as rolling 13 week cash flow forecasts are extremely useful from a liquidity planning perspective.

A daily forecasting process would often include a degree of automation capturing cash flows from bank accounts and ERP systems. Typically they look a couple of weeks into the future and contain a daily breakdown of cash payments and receipts.

Short term forecasts are used to manage the day-to-day cash needs of a business.

The longer the forecast the less detailed the forecast is likely to be. Generally there is a trade-off between availability of information and forecast duration.

This will be determined by business needs and the availability of information within your organisation. When setting up a cash flow forecast the first decision that needs to be made is how far into the future the forecast will look. Capturing actual cash flows means that you can compare what was forecasted to what was actually received allowing you to analyse the accuracy of the previous forecasts. Historic cash flow data provides a good basis for making future projections.ДЈ. It ensures that the projected cash flows are starting from the actual cash flow position.Дў. The benefits of capturing actuals in a cash forecasting process are:ДЎ. In the example above left of the red line indicates that the cash flows are actuals. For example some companies would track high level Accounts Payable / Accounts Receivable cash flows and other companies would break the cash flows down to the level of individual customers and suppliers.ДЄs well as capturing forecasted positions, cash flow forecasts often also capture actual cash flows in the same model or template.

The cash flow items that make up the receipt and payment elements are unique to a companyвЂ™s forecasting needs. The image below shows a cross section of 13 week cash flow forecast: Д«roadly speaking, most cash forecasts will be structured as shown below. Net Movement вЂ“ either by individual cash flow item or at a minimum total net movement.Payments вЂ“ again broken down by cash flow item.Receipts вЂ“ broken down by cash flow item/ classification.Typically a cash forecast will contain some or all of the following components: A more comprehensive cash flow forecast will show you where your cash is right now, where itвЂ™ll be in the future and what will happen along the way (e.g. This helps highlight when and where funding needs arise and allows you to take advantage of times when excess liquidity is available. In its simplest form, a cash flow forecast will show you where your cash balances will be at certain points in the future. In this post we look at the main components of a cash flow forecast, the importance of actual cash flow data and a number of different types of cash flow forecasts. The main purpose of cash flow forecasting is to assist with managing liquidity, the larger the company the more complex and challenging cash flow forecasting becomes. A cash flow forecast is a tool used by finance and treasury professionals to get a view of upcoming cash requirements across their company.

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