How Useful is Cash Flow Forecasting?
Nearly all business managers wish they had a crystal ball that they could use to predict the future. While that may be impossible to obtain, the next best thing may be cash flow forecasting. With this useful business tool, business decision makers can seek the advice of a cash flow forecaster to use past and current data from their businesses to get some idea of what the future could bring. A cash flow forecaster can offer insights that are learned from trends in an industry and from tracking sales and other economic data.
Cash Flow Forecasting Models
There are two basic models of cash flow forecasting, which are the direct method and the indirect method. The direct method is based upon cash inflow and outflow and is the simpler of the two methods. It works better with smaller businesses that have a limited number of transactions and is more effective for short-term planning. However, the direct model may be used in a larger business if it is applied to a specific smaller project within the business.
The indirect method is more useful for long-term business planning and uses company balance sheet information as well as bookkeeping data to predict future flow of cash. This type of forecasting involves both cash flow and non-cash factors, like depreciation.
Advantages of Cash Flow Forecasting
Cash flow advantages offers many advantages to a growing business. It uses known information to peer into the future, making it possible to consider a variety of future scenarios. It can also help to predict the slow times so that a decision maker can plan ahead to take mitigating steps. Cash flow forecasting can help a business manager to find all opportunities for increasing cash flow, but most importantly, it can also utilize known business data and market conditions to make more informed business decisions.
Call to Schedule a Free Consultation With an Oregon Certified Public Accountant Today
If you are a business decision maker who would like to take more control of the future growth of your business, call to schedule a free consultation with an Oregon certified public accountant today. The well-trained staff at the digital accounting firm Perpetual CPA will analyze your business financial data to give you a clearer picture of where your future is headed and will show you the best ways to intervene. Visit our web site at perpetualcpa.com or give us a call at (503) 217-4114 and speak with our friendly staff to set up your consultation. You’ll be amazed to see how much closer cash flow forecasting can take your business to where you want it to go.