1 / 8

Effective Cash Forecasting Strategies for Business Success

Learn the importance of short-term cash forecasts and how to develop monthly cash budgets. Understand the differences between daily and monthly cash forecasting, as well as the methods used for forecasting cash flows. Explore forecasting philosophy, parameters, and tools to optimize your financial planning.

neila
Download Presentation

Effective Cash Forecasting Strategies for Business Success

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Chapter 12Cash Forecasting • Order Order Sale Payment Sent Cash • Placed Received Received • Accounts Collection • < Inventory > < Receivable > < Float > • Time ==> • AccountsDisbursement • < Payable > < Float > • Invoice Received Payment Sent Cash Disbursed

  2. Learning Objectives • Explain importance of short-term cash forecasts. • Indicate why the monthly cash budget is important to top management, and specify the two objectives for its development. • Indicate how daily cash forecasting differs from monthly forecasting. • Explain the receipts and disbursements, pro forma balance sheet, and distribution methods of cash forecasting.

  3. Forecasting Monthly Cash Flows • Importance to top management • Monthly cash forecast objectives • Forecasting philosophy • Forecast parameters • Statistical tools

  4. Forecasting Philosophy • Number and type of forecasts • Expenditure on forecasts • External versus internal forecasts • Quantitative versus judgmental forecasting

  5. Forecast Parameters • Forecast horizon • Variable identification • Modeling the cash flow sequence • Format of the receipts and disbursement forecast • Interpreting the receipts and disbursement forecast • Developing the receipts and disbursement forecast • Modified accrual method • Pro forma balance sheet method • Model estimation • Model validation

  6. Forecasting Daily Cash Flows • Horizon • Variable identification • Modeling the cash flow sequence • Structuring the daily cash forecast • Distribution method • Model estimation • Model validation

  7. The Distribution Method • Using the method for disbursements • Using the method for collections • Example • Final comments

  8. Summary • The chapter began with a discussion of the philosophy and environment within which cash forecasts are made. • The value of forecasts is to borrow less or extend investment maturities. • The two major cash forecasting time intervals (monthly and daily) were presented and the processes for variable identification, modeling the cash flow sequence, model estimation, and model validation discussed.

More Related