Why cash is king (or reality) for your business

Don’t run out of money. Always good advice, but with so much else to worry about, I am starting to see some companies take their eye off the ball. All business comes down to money, yet most companies spend so much time on forecasting their profit (or losses) and see cashflow and balance sheet as small after-thoughts.  

Having lived through, and worked through, a few recessions now, that old adage “Cash is King!” is as true today as it ever was. Yet I see companies spending 99% of their forecasting time on their P&L, either paying lip-service to balance sheet and cashflow or making limited high-level changes right at the end of their forecasts.  

Integrated financial forecasting

What you need is an integrated approach. A way of linking your P&L movements to your balance sheet and cashflow. A way to also include your capital expenditure. A way to use real life payment profiles for your receipts and payments. Note – never use your contracted terms, use reality! If your customers should pay you at 30 days but in reality, it is 45 days, or 60, then use those figures. 

You need to know which accounts on your balance sheet will be changing while you wait for cash to arrive or depart (usually Trade Debtors or Creditors). You need to know which sales lines, and which purchase lines attract VAT, and at what rate. And when that VAT is payable. 

It sounds a lot to model, doesn’t it? Yes, it took a while. Yes, some of it was complicated. But we did model it, so you don’t have to. FORECASTED from Simpsons does all of that, so you don’t have to. Concentrate on your P&L, and we will help you do a one-time mapping to the Balance Sheet and cashflow. Then, you end up with a truly integrated planning model. 

Ready to find out how your business can reduce man hours and cost with the future of forecasting:  Find out more about FORECASTED today.


Blog Author 

Paul Baron, FP & A Engagement Manager 


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