Cash flow forecasting is the process of collating flows from across the business (for either one or more entities, typically across all currencies) to create a picture of cash flow requirements or surpluses over a defined period.
Cash flow forecasting may be a simple concept in theory, but it is typically one of the most challenging treasury activities. Cash flow forecasts typically include all treasury-related flows (investments, loans, FX and derivative transactions) together with tax payments, dividends, salaries and expenses, accounts payable and accounts receivable for all of the entities for which treasury is responsible.
- Importance of cash flow forecasting
Objectives – Liquidity – Risk – Cost
- Types of cash flow forecast
Long term – Medium – Short
- Addressing the challenges
Implementing and integrating TMS – provide KPIs
- Business planning cycles and content
Working capital management processes
- Cash flow forecasting methods
Moving – Distribution – Heuristics – Scenarios
- Successful forecasting
Forecasting vs plan vs target
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