We have developed literally scores of Excel cash forecasting models to help SMEs understand and anticipate cash positions, trends and prospects. While there are general rules that apply to all, our wide experience of different businesses and sectors reveals striking variations in cash patterns. Where these are complex, or highly seasonal, particular care is required.

Cash flow plans can be built up from current and immediately foreseeable transactions. They can also be built down from an integrated view of how the forecast P&L and balance sheets will move, and how these broad movements will impact cash.

It is preferable if the main assumptions within an integrated cash forecast are referenced to a business plan and periodically rolled forward to extend cash visibility. Regularity of review breeds greater forecast accuracy. Cash forecasting is most effective when done in harmony with an updated business plan. Even if the plan is in ‘one page’ summary format, we can model cash using profit & loss and balance sheet projections (referenced back to the latest audited accounts) within one of our standard formats.

An integrated cash flow will typically prove to be more accurate, and can go further into the future, than the shorter range cash flow that starts with foreseeable individual transactions. Both methods have their uses - depending upon need, cash tightness and historical cash patterns.

Good business managers will use integrated cash forecasts to underpin their financial plans and win credibility with shareholders, bankers and major trade partners. Properly used, integrated cash forecasting is a valuable tool, akin to ‘financial radar’ for management. It helps steer SMEs towards business development and safe progression, by foreseeing any future ‘funding gaps’ early enough in the process to sensibly address such needs.