“Cash forecasting is a necessary but insufficient trait of a profitable, well-run, responsible business.”
Growth companies can grow themselves into bankruptcy or otherwise be forced to raise operating capital at highly unfavorable, even predatory terms.
Companies in trouble simply need to watch cash, plugging leaks, coordinating outlays with income while addressing fundamental strategic, structural matters.
Even companies on an even keel wake up one day to find that cash on hand is not what it once seemed, realizing much, much later than could have been the case, that they too are now in trouble.
“If your business won’t lend itself to forecasting, neither will I.”
You may feel that you don’t need to forecast cash. Or, you may feel that your business situation doesn’t lend itself to forecasting. I know. I’ve felt that way. Then, it was as if the Banker Himself had said, “If your business won’t lend itself to forecasting, neither will I.” And so I found that it wasn’t until I started forecasting cash that I stopped running out of cash.
“It’s not the forecast: it’s the forecasting”
The scale doesn’t magically draw pounds from the soles of your feet. Nor does a forecast by itself increase your cash balance.
The act of weighing yourself draws your attention to your weight. It’s the attention you give to the weighing event and weight result that prompts you to rethink food choices and lifestyle choices. It’s that you thought about it and began to make better, healthier lifestyle choices. Your diet improves. You exercise more effectively. You notice the results on the scale each morning.
Likewise, the forecast simply shows you where you are and where you’re likely to be as your projections of the future walk toward you into the present.
Once you realize that you may run out of cash in, say, 53 days, you can now focus your attention on the underlying matters at hand: rebuilding your planned spend transaction by transaction up from zero, getting serious about turning your forecast into into sales and your receivables back into cash.
There’s a better way. It requires use of better Cash Intelligence. Cash Intelligence is Business Intelligence simplified to its essential core: cash flow.