Whether your independent business is growing or in trouble, just starting out or making exit plans, increasing your cash intelligence will decrease the likelihood of failure. This cash forecast tool provides a simplified, low-cost way to get started.
Eight Cash Tool Benefits
- Eliminates need to create, manage, fix spreadsheets.
- Enables you to forecast in both weeks and months at the same time.
- Forecast begins with your current P&L and balance sheet, so forecast reporting is seamlessly tied to actual results.
- Business rules and assumptions are organized for analysis and presentation rather than littered throughout multiple spreadsheets, cells and tabs.
- Top-down scenarios can include recurring sales events and any related events: purchases, payroll, manufacturing steps, cash receipts, etc.
- Bottom-up scenarios can include fixed, direct, selling, service and true general and administrative costs.
- Top-line down and bottom-line up scenarios can be combined into a single forecast.
- Forecasts can be saved, revised and reviewed based on multiple sets of funding or financing criteria.
The cash tool lets you create real world scenarios for your business independent of complex, obscure formulas copied and pasted across and throughout spreadsheets.
Spreadsheets are typically tied to a weekly or monthly base unit of analysis. While weeks and months can easily be summarized into quarters and years, flipping between weeks and months is difficult if not impossible without another series of complex and ultimately arbitrary set of formulas.
Does the number 4.33 have meaning to you?
Think: leaving aside the matter of accruals, how does one fit weekly direct labor costs into discrete monthly buckets? Likewise, let’ say you typically receive materials from your three largest inventory vendors. One receipt is on the first day of the month, the second on the second Tuesday of the month and the third is on the third Friday. Obviously, in a monthly model, those receipts are irrelevant: the payable or accrued payable is simply put in that month.
But, what if you have a weekly model because, for instance, your weekly payroll expense seemed simpler to work from as the basis of your model? Now, then, you’d want to put these receipts into the proper week, right? How would you do it? If you’re thinking already about calculating the week of the year based on the expected receipt date, then you’re onward to the answer.
The simple, least cost approach in handling forecast data that can be dependent upon monthly AND weekly recurring schedules is to reduce the unit of analysis to the common unit of measure. That is, the date. Working with data at the date level allows you to aggregate weeks and months as needed.
Revenues, costs, and cash receipts are described within simple, real-world scenarios. These are based upon historically grounded expectations and rolled up with other scenarios to show accumulative results across any time period, from daily to yearly.
Dates are based on actual data imported from your historical results. Optimally, your analysis is based on a seamless combination of results up to today and forecast from today forward.
Scenarios can be simple, one time events or any series of events based upon a repeatable schedule. For instance, annual or quarter tax payments, monthly utilities and vendor payments, weekly payroll, sporadic vendor payment schedules can all be combined into a single forecast. Likewise, revenues can be aggregated based on key customers and customer groups.
The 80/20 rule is always in effect
You needn’t model every trivial sale or expense. Model the critical few revenue and expense factors as discretely as possible and lump the trivial many into groups based on dates and your chart of accounts.
Further, the scenarios can be strung together into a series of related events. Beginning with revenues or customers. For instance, say you have a customer that buys $X from you each month. That sale requires that you make purchases, hire so much labor, etc., on a schedule. Further, you ship and bill customers. The customer pays you ±65 days later. All of these assumptions get rolled into the forecast.
The cash tool lets you see the expected results without rebuilding – destroying, fixing, or paying for – complex spreadsheet models.
More information is available to qualified independent business owners.