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Cash Forecasting: Internal Communication is Key

June 22, 2011 Finance

Today CFO’s and CEO’s are expected to maintain a watchful eye on their cash flows; every dime spent and every dollar earned. But companies need a disciplined approach to record keeping and forecasting to be successful.

  • First, identify the manager responsible for the cash forecast and their team. The team is made up of an owner from each functional area of the business (payables, receivables, credit, purchasing, sales, operations, etc.).
     
  • Second, clearly communicate the forecasting process and requirements to the team. Be sure to outline expectations, templates, due dates and accountability for variances.   Training may be required to ensure they understand the importance of the cash forecast to the success of the business.
     
  • Third, set a standing weekly meeting to get updates on the cash inflows and outflows.   Each meeting works toward refining the projections. Send reminders for when the updates are due. It will take several months for the forecast to become routine and a key thought process as the team members perform their roles in the company.

Forecasting is a discipline and implementing a successful process requires change-management skills and time to gain buy-in from the team. Once established properly, cash forecasting will be a business as usual function and the company can make well-informed cash management decisions. 

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