Business and Cash Flow Forecasting is one of the most important CFO Services. It offers the foresight business owners need to take appropriate action when they run into cash turbulence problems, such as a cash flow problem. And yet, businesses are run every day without any thought as to what will happen in a month, in a quarter—or even in a week! Many business owners don’t see the urgency for Business and Cash Flow Forecasting, and as a result, their competition that does gets the upper hand.
If you don’t use or understand Business and Cash Flow Forecasting, what does your competition see that you don’t?
Business and Cash Flow Forecasting will:
- Reveal the weaknesses and strengths within your organization.
- Find ways to solve those weaknesses and improve on those strengths.
- Tell you more about your business.
- Predict potential trouble down the road, like cash turbulence (ie a cash flow problem), giving you more time to be proactive about problem solving.
- Make the people in your organization accountable
- Generally give the business owner piece of mind
If there’s a problem with Business and Cash Flow Forecasting, it’s that after 30 days the forecast becomes outdated and after that it is often forgotten completely. The solution to this problem is to perform a Rolling Forecast. A 12 month Rolling Forecast will allow you to enter results for the most recent month while the rest of the forecast rolls forward to the next 12 months. I personally suggest a 24-month Rolling Forecast because it will give you a longer-range perspective of where your business is going. With the monthly updates provided by the monthly occurrence and planning process of a Rolling Forecast, the CFO and business owner can identify problems and make changes as needed. Again, personally, I like to combine the results of my clients’ Rolling Forecast with an analysis of their Key Performance Indicators for the month.
As a business owner, you’ll want a Rolling Forecast because it keeps you on top of your game and gives you the advantage over the many business owners who overlook having one.