Cash Flow Forecasting – Don’t take your hands off the wheel

I must admit, personally, the thought of autonomous cars driving themselves while we read books, watch Netfix or climb into the back seat to do what should be done at home or in a secluded place at night, fills me with horror. It might be because I’m not from Generation X who blindly believe in technology, but here’s why.

Evidentially, I’ve seen enough software hang up or misbehave over the years that I just couldn’t sit in a car with no one at the wheel and let some software package take my life and that of my fellow road users into its dispassionate hands and still sleep at night or more to the point in the car.

The trend to automation continues with Cash Flow forecasting. ProForecast, of course, has a cash flow forecasting function and will show you what your predicted sales volumes and margins do to your cashflow, this is essential for strategic planning.

There are so many variables in the real world of cash flow that its impossible to predict accurately in the real world for any meaningful length of time.

If you have a cash rich business, then you probably aren’t that worried about cash flow in the short term. If you are a small business with cash flow challenges, you should be managing this on a daily basis, there isn’t a piece of software anywhere that can help you here.

When cash is tight you have daily decisions to make based on when you get paid, who you pay and when. You might have an essential supplier that you just have to pay on time come what may or you will lose credit terms or priority on inventory. Who to pay and who not to pay is something you have to decide based on the size of your bank balance every single day.

If cash is an issue, you may defer rent payments or even VAT or PAYE as although HMRC and your landlord have the biggest sticks they are actually the easiest to deal with when you have a short-term cash flow issue. If you communicate with them, they will be helpful.

You really need to be on top of this minute by minute watching for cash coming in and then making a decision as where it goes out to based on who is most important. First should always be payroll but after that it’s a judgement call on your part. There is no software in the world that can replace a human and their ability to deal with creditors to help you through a tough period. Buyer beware if you have invested in one of the current crop of cash flow forecasting software that you plug into Xero and ride the sofa to continued solvency with automated alarms when an issue could potentially raise its head, prompting you to some pre-defined action. When it does so it’s almost certainly too late.

Forecasting is a strategic planning tool, that should be used to show how various scenarios will affect your business going forward. If you are planning on introducing a new product, raising debt, acquiring another company or need a valuation for a trade sale, if you want to manage your investors or produced informed board reports, forecasting is essential. Will forecasting ever be able to advise you on the gut feel of what and who to pay when, when things are tight, never.

Don’t drive your business into the back of a truck because you left the management of an essential function to a piece of off the shelf software. If you want to use forecasting as a powerful tool in your strategic planning cycle then talk to us at

Mark Harrison

Chief Commercial Officer – ProForecast