Cash flow forecasting in excel is very popular amongst accountants today. As many bookkeepers and accountants are moving to the advisory business model cash flow modelling is becoming an integral part of their business services.

Many use cash flow modelling to calculate the growth rate required to meet certain objectives, which either have been set by the company itself or their stockholders. This rate is then often used to reference the organisation’s attitude to risk to ensure their expectations are realistic and compatible with the asset allocation needed to achieve the required growth rate.

Cash flow modelling is perceived as one of the most important factors in helping clients understand the advantages of financial planning. But despite cash flow modelling being the critical activity for both clients and advisors, many still neglect it and miss out on their financial objectives frequently.

While those who do also stumble into a multitude of issues, many of which are associated with the tools they use to create cash flow modelling. And there are some glaring issues with cash flow forecasting in excel.

The first problem with a cash flow forecasting in excel is that it often is a stand-alone piece. Such a monthly cash flow forecast lacks integrity. It really needs to be a part of a bigger picture, it has to be linked to a forecast of P&L and balance sheet, and should take into account invoicing dates, profile of debtor’s collection at the minimum. This is where a solid software, like ProForecast, is vital to intermediaries to provide this context within which you can create a strategy to help achieve the necessary financial goals.

The second problem with cash flow modelling in excel is that running scenarios can be cumbersome, for the client itself or for demonstrations purposes. Cashflow modelling works best when the client can see their model and scenarios can be run in front of them. From this, a client can immediately ascertain the impact their decisions will have before finalising a strategy.

Now, the third problem with cash flow modelling in excel is the obvious lack of integration that such models have. If cash flow modelling becomes an isolated process it will likely fail by becoming inaccurate and therefore unproductive. And without accuracy, it’s much more difficult to identify and keep on top of trends, which are essential to adapt to a changing business environment. This is where businesses can reap the benefits of switching from spreadsheets to cash flow management tools. With spreadsheets, inputting financial data might be simple, but requires lots of manual effort to analyse data. In contrast, a cash flow modelling system that can integrate with your accounts with a few clicks means that you and your clients can concentrate on analysis rather than input.

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