Everything Planning

Cash Flow Planning: Showing Your Company What’s Ahead

By - Apr 14, 2016

Forward-Looking

Cash Flow Planning is Forward Looking

“Most owners truly don’t have a handle on the flow of cash into their business and the flow of cash out of their business,” says Philip Campbell, CPA and former CFO of several companies. The reason, says Campbell, is that many business managers were convinced that a set of financial statements gives the complete financial picture of the company. The truth is, financial statements are only part of the whole picture – the backwards looking part, a rear view mirror for your financials. From this perspective, Cash flow planning is like teaching your sixteen-year old to drive. Your son or daughter may be able to handle the vehicle well enough. But he or she depends on your foresight and real-time analysis of the driving conditions to safely get to the desired destination. A properly prepared cash flow statement provides a forward looking view about where and how your company get there.

Core Financial Planning is like Teaching a Teen to Drive

When my teenager gets behind the wheel I am extra alert for any possible road condition that may require driving adjustment. I analyze the conditions often and as far ahead as possible. Good Core Financial Planning operates the same way – you forecast early and as far ahead as your current data can take you.

Teen drivers are adequately proficient about seeing what’s directly in front of them. They may not be so good, however, at inferring what cannot be seen directly. That’s exactly how it is with cash management. It’s easy to look at the A/P and A/R ledgers and know what’s happening in the next 30 days. The challenge is to go beyond the short-term view and accurately infer what will happen down the road.

I also learned that looking at that recent near miss via the rear-view mirror may have educational potential, but driving safety requires real-time analysis of what’s ahead. The same is true with cash flow planning – you can review the accuracy of your model via the financial statements, but you need real-time predictive capabilities to more forward safely.

If only Teaching Driving could be Made as Simple

In today’s business environment a lot is required of financial managers. Fortunately, the cloud-based Kepion Corporate Planning Management platform combines cash flow planning software with powerful reporting capabilities that analyzes detailed projected information, performs aggregation at the level you require, and provides a means to effectively communicate the results across the organization.

Now if only there were a similar solution for helping teach my daughter to drive…..


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