Develop Accurate Methods to Predict Future Cash Flow

PMF Bancorp: Cash Flow Projections
PMF Bancorp: Cash Flow Projections Keep You Profitable

The goal of PMF Bancorp is to be an effective resource for our clients. Whether providing access to invoice factoring, lines of credit or trade financing, PMF Bancorp is a trusted source in the financial industry. By delivering the information you need, we know from experience that we can help your business manage capital and increase profits. As part of our program, PMF Bancorp offers this ongoing series of monthly financial tips to help your company thrive in a challenging economic climate.

Many companies would like to be able to successfully predict their cash-flow needs. Here is how to do it….

Since cash flow tends to be uncertain, your company should employ a form of forecasting model to predict future cash-flow needs. The most basic forecasting method is the comparison and balancing of receipts and disbursements. When a company employs this best practice consistently, they develop use models that tend to provide even more accurate data. More advanced models should be based on all available sources of quantitative and qualitative business intelligence, including shipping data, sales orders, buying patterns and vendor contracts. In addition, your company should make such forecasts based on seasonal, monthly, and daily patterns.

As a result, your company can set financial forecasts under more specific criteria for short-term, medium-term and long-term projections. Short-term cash flow projections can track how a business unit is faring in the current economic climate. Medium-term projections can help in managing current economic trends and seasonal price fluctuations. Finally, long-term forecasts can help your company achieve recognized goals through the designing of and the setting up of specific financial markers.

If you want to set-up a system to integrate new information into the forecast as soon as it is available, employ a rolling format that considers incoming and outgoing bills and receipts. Rolling forecasts, simulation techniques, and web-based treasury software can improve future cash flow predictive accuracy. These and other new technological capabilities can be employed to truly bring your company’s financial forecasting abilities into the 21st century.

By establishing such accurate and effective financial forecasting methods, your company will remain productive through cash-critical periods. You will know what needs to be done in advance, avoiding unexpected cash crunches that can hurt a business. At PMF Bancorp, our goal is to keep your company profitable by ensuring such a productive future.

For more information on techniques to expedite and ensure your company’s present and future cash flow, please click here to learn more or call us at 877-763-2286 for more information.

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