When CSR works on strategic planning with new clients, we always request historical financials in the form of detailed profit & loss statements and balance sheets. These reports provide great information on trends, performance, and strategic objectives. They also establish a firm foundation for a long-range proforma, which is a key deliverable in our strategic plan for each client.
Profit & loss statements and balance sheets remain important reports to generate and analyze as we continue to work with our clients, but we find that the most illuminating financial report – hands down – is a cash flow forecast. We’re not referring to a cash flow statement which is a nice backwards-looking snapshot of a company’s financial health and operational efficiency, but a cash flow forecast.
The process of constructing and maintaining a cash flow forecast forces a company’s principals to take a hard look at its relationship decisions and policies and see how those are impacting cash health for weeks and months ahead. It’s a huge confidence boost to know where investments can be made and peace of mind that there are cushions and guardrails in place.
Let’s break things down with some important questions – first on the inflows side (cash remaining in or coming in) and second on the outflows side (cash going to pay for services or goods necessary to run one’s company).
Inflows
Is your cash earning as much as it should in today’s market?
Are credit accounts at the lowest interest rate possible?
Do you have an adequate reserve balance set aside for emergency situations?
Are your invoicing routines sound and aligned with agreement terms?
How is accounts receivable performing? Is your customer base generally paying within your terms or taking liberties? Do you have adequate resources applied to collection efforts?
Outflows
Are you able to pay your employees and contractors quickly and consistently?
Are you also able to pay your vendors quickly and consistently, or are you stretching those relationships to match with difficult collection situations?
Are your methods of payments allowing you plenty of review and control and also using the most economical platform?
Are there any services or goods that require your cash that are no longer serving you well – in any capacity? This analysis goes hand in hand with a good expense audit from your profit & loss statement, but things really become obvious under the cash flow forecasting scope.
Understanding the ins and outs of cash flow forecasting can really change the game for your business. But we know it's not always easy to get started, especially for small- to medium-sized businesses. That's where we come in. At CSR, we offer a range of services from strategic planning to sales management, and we're keen to help you get a handle on your cash flow forecasting.
If this sounds like something you could use, don't hesitate to get in touch. Call us at 404-850-7957 or shoot us an email at info@expertiseinresults.com. If you prefer, there's also a contact form on our website for a quick way to reach out. Let's make your financial planning simpler and more effective.
About the author:
Catherine Fuss brings over 20 years of experience from GE to her work in marketing and strategy, enhancing brands and driving growth across various sectors. A Duke alum and Six Sigma expert, she now leverages her extensive expertise for diverse clients, from law firms to technical trainers, creating impactful marketing solutions.