Business 101: The Golden Rule - Cash is King.
We know this, right? Regardless of a company's revenue or net income, cash is the lifeblood of an organization. Having sufficient cash on hand is essential for both survival and success.
At the most basic level, we can't pay our bills without it. But beyond that, we can't invest in growth opportunities without it, and we can't manage unexpected expenses or economic downturns without it. Proper cash reserves are vital to successfully running our business. Period.
And because we need it—not just today, tomorrow, or next week—it's important that our cash is always well positioned. So, we forecast it. Not just for today, or for tomorrow, but for a full 13 weeks on a rolling basis. This ensures we always have a full quarter outlook and are positioned appropriately. Cash forecasting is a critical aspect of financial management for any business, regardless of size or industry.
Benefits of a 13-Week Rolling Cash Forecast
1. Helps Liquidity Management
By providing insight into a company's expected inflows and outflows over a specified period of time, the business can plan and manage liquidity accordingly.
2. Supports Better Decision Making
Understanding anticipated ebbs and flows helps key leaders make the most informed decisions about liquidity management, including investments, expenses, and financing activities.
3. Enables Proactive Management
Forecasting provides a line of sight to anticipated shortfalls or surpluses, allowing organizations to take proactive measures to address them appropriately.
4. Increases Accountability
This living, breathing tool facilitates tracking of actual inflows and outflows versus expectations, identifying discrepancies and/or detecting issues early on, enabling quick corrective action.
5. Provides Visibility to Stakeholders
A cash forecast can provide stakeholders, including investors and lenders, a clear line of sight into a company's cash position, increasing confidence and supporting their decision to invest.
So, yes, Cash is King. And companies that prioritize cash management and forecasting are wearing the crown.
