The forecast cash flow, also known as projected cash flow or forecast, is a financial tool used by companies to predict and plan the inflows and outflows of cash over a future period. This tool is crucial for the financial management of companies as it provides a clear view of available liquidity and helps avoid insolvency situations.

The forecast cash flow, in other words, is an estimate of the income and expenses of a company for a specific future period. This forecast is useful for financial management and helps accurately plan future cash balances.

Here are some key points related to forecast cash flow:

Income and Expenses

Income: represents the sources of money available to the company during the considered period. These can come from sales of the core business, investments, bank loans, or other financiers, etc.

Expenses: represent uses of money that can arise from operating costs, payments to suppliers, salary, tax and interest payments, etc.

Reference Period

Forecast cash flow can be short-term or long-term, depending on the specific needs of the company and available forecast data.

Adaptability

Cash flow forecasts may be subject to variations due to changes in market conditions, unforeseen events, updates to conditions with customers or suppliers.

The analysis of forecast cash flow serves various purposes depending on the business context.

Here are some examples of use:

1. Management of liquidity: accurate cash flow forecasting helps identify periods of peak or shortage of liquidity to make any necessary corrective decisions.
2. Evaluation of performance: serves as a key indicator of a company's financial performance that also impacts operational efficiency.
3. Financial planning for strategic decisions: provides useful information for strategic evaluations. One can simulate an investment and check its impact on the forecasted company liquidity.
4. Responses to market variations: helps identify and adapt to market changes or changing economic situations.
5. Negotiation with Suppliers and Creditors: provides a solid basis for negotiations with suppliers and creditors. Accurate cash flow forecasting can influence payment terms or contractual conditions.
6. Reduction of financial risk: helps identify and mitigate financial risks, reducing the likelihood of insolvency or financial difficulties.
7. Communication with Stakeholders: enables transparent communication with investors, shareholders, banks, and other stakeholders. Clear cash flow forecasting can strengthen stakeholder confidence in the company. This becomes crucial when talking about the growth and success of a startup that relies on the trust granted by its investors.
8. Compliance with financial reporting obligations: helps companies plan and meet financial obligations and produce reports required by regulations.

In conclusion, forecast cash flow is a fundamental tool for the financial management of a company. Analyzing this data may require significant data processing time, but with the right tools, these times can be substantially reduced.

Managing Cash Flow with So Smart

With the "Management Control" app from So Smart, the forecast cash flow is ready in just a few clicks!

The calculation of income and expense forecasts is based on data present in the ERP without the need to copy or modify external system data.

Here is a summary of the entities involved in So Smart's cash flow:

Nella homepage di Microsoft Dynamics 365 Business Central è disponibile un grafico che riassume il cash flow aziendale previsionale che permette di monitorarne l’andamento generale e la stratificazione per tipologia di entrata e uscita finanziaria, suddiviso per periodo. La visualizzazione può essere personalizzata selezionando i parametri preferiti.

Not only that: the data can be analyzed in detail, down to the specific data that feeds it, thanks to the analysis of the Cash Chart of Accounts and the Financial Reports.