Utilizing Cash Forecasting for Your Company’s Financial Future

What is Cash Forecasting?  

Cash Forecasting helps to estimate the financial position of your business over a specific period of time. The value of Cash Forecasting allows you to predict upcoming cash surpluses or shortages, meet company obligations, and reduce risk to your business. All divisions and sections of your corporation can benefit from cash forecasting. Cash Forecasting serves as a financial asset for many businesses; however, ineffective forecasting can lead to poor advice and ill-informed business decisions if not properly completed. Having proper Cash Forecasting tools can help you to improve communication and real-time data for your company and its business decisions. 

Cash Forecasting Process  

The Cash Forecasting Process functions within four key concepts. The concepts are as follows:  

  1. Short-Term Liquidity Planning: By planning for a smaller time frame, you enable your financial team to avoid last-minute liquidity deficits and surpluses.  
  1. Improve Decision Making: Forecasting to improve business decisions means your team is prepared for payments on loans and any debt your company may incur 
  1. Growth: Financial forecasting allows you to better manage working capital and fund activities that will help to grow your business 
  1. Multiple Forecast Scenarios: It is essential to be prepared for changes in your financial environment and develop forecasting scenarios for different time periods, objectives, and uses 

How to best forecast for your financial future can depend on many things, including time periods, business objectives, and forecast usage. Short-term forecasting occurs on a one to four week projection with daily updates detailing your daily cash position. Mid-term forecasting utilizes a three to four month projection with weekly updates detailing your liquidity and borrowing decisions. Lastly, long-term forecasting takes place over a twelve to eighteen month projection with monthly updates detailing your earnings and capital management.  

Cash Forecasting Process Workflow  

The workflow process for cash flow forecasting takes place on this six-step basis: 

  1. Forecast Initiation – The process of starting automatic and manual gathering of data related to the cash forecast 
  1. Forecast Capture – The process of running and producing the cash forecast based on data and timespan 
  1. Forecast Analysis – The process of analyzing the results of the cash forecast. 
  1. Exposure Analysis and Reporting – The process of reviewing an organization’s exposure to certain market conditions 
  1. Hedge Strategy and Decision Making – The process of applying and hedging strategies and making decisions on liquidity 
  1. Trade Calculation and Execution – The process of executing any trades related to liquidity decisions 

Cash Forecasting Added Value and Best Practices 

Looking to the future and planning for financial changes not only assists in accomplishing financial goals and objectives but adds value to all sectors of business. Cash Forecasting helps you avoid liquidity and capital issues, maximize your cash asset value, enhance business controls, increase risk management, strengthen stakeholder comfort, improve business planning, and better your company’s financial performance.  

When developing your cash forecasts, it’s best to define your end goals and determine how much time and effort is needed for success, as well as what level to perform tasks at. Giving clear direction about goals and objectives to primary data sources is essential for capturing accurate data. Cash Forecasting requires you to optimize cash visibility, as cash visibility serves as the lifeblood of any organization and is necessary to avoid limited viewpoints and erroneous decisions. Forecasts also require detailed tracking of action items, issues, and risks for overall accuracy.  

Successful forecasting incorporates both short-term and long-term aspects, and operates on a daily, weekly, and monthly basis to ensure optimization. Forecasting should be automated where possible. Consolidating and gathering inputs automatically will improve accuracy and provide increased efficiency for cash managers. Using statistical analysis and historical data provides realistic mapping and should be used as a baseline for forecasting. Forecasting reports should be user -friendly and balance precision with effectiveness, using only required data.  

Cash Forecasting Participants  

Spanning across all business divisions, Cash Forecasting includes participants from sales and marketing, AR and AP, product managers, and treasury. Sales and marketing collect and analyze sales data for trends and projected expenses. AR and AP estimate the amount of cash that a company is due to receive or pay over a set period. Product managers manufacture fixed and variable costs, as well as logistic, distribution, and transportation costs.  

Cash Forecasting Roadblocks 

Accurate Cash Forecasting is critical but can be challenging to undertake. When building your forecast, it’s important not to ignore seasonal trends, use incomplete or inaccurate data, limit viewpoints, fail to communicate, or base forecasting on uncontrollable external factors.  Additionally, changes in interest rates and market changes must be considered. Neglecting to regularly update cash forecasts or account for payment and project delays can lead to errors in forecasting.  

Managing Cash Forecasting  

Sources of Data  

Liquidity can be forecasted through an array of data sources, including bank transactions and balances, sales forecasts, business unit forecasts, interest flows, capital expenditures, AR and AP, FX and derivatives settlements, investment and debt maturities, and repetitive payments.  

Conventional Ways of Gathering Data  

Gathering data to use in Cash Forecasting can be done in many different ways. You can collect data by organizing or taking part in meetings and phone calls or communicating with teams via email. Data can also be gathered by acquiring spreadsheets from different departments or manually logging into multiple bank portals. After collection, data can then be consolidated into one spreadsheet for use. All these collection platforms interact in a cyclical fashion and work to support data from the other platforms.  

Automated Ways of Gathering Data  

Data can be gathered using automated techniques that allow for easier assembly of information. Automated techniques include pulling data automatically from banks or from different business departments. Another benefit of automated data gathering is the ability to liaise with teams via systems. Automated data platforms allow forecasts to be updated by any user and store information in a centralized location for easy access.  

Tools for Managing Cash Forecasting  

There are many tools you can utilize to manage Cash Forecasting, including manual tools like Excel, Smartsheet, and Google Sheets. Automated applications for managing Cash Forecasting include treasury management systems like Kyriba, FIS, Gtreasury, and SAP. Automated applications solutions also include Tableau, Qucikbooks, CashAnalytics, and Cashforce.  

Core Cash Forecasting Concepts  

Cash Forecasting is the process of predicting what the financial situation of your company will be in the future. It is a valuable tool that helps you anticipate future cash flows, avoid cash shortages, and maximize profits on cash surpluses. Devoting resources to collecting accurate and timely data enables you to create relevant forecasts. Defining your end goal, optimizing visibility, and updating forecasts regularly are best practices you should adhere to for max benefits. Lastly, using automated applications can help centralize your data and assist you in your Cash Forecasting efforts.  

Keep In Touch  

If you would like to learn more about Cash Forecasting, please watch the ETE 2022 Cash Forecasting Finesse seminar in the ETE 2022 Session Catalog, using the password “Treasury2022!”. If you have any questions related to Cash Forecasting or Treasury matters, please reach out to [email protected]. For more expert Treasury learning, subscribe to the Elire Treasury Newsletter or follow us on LinkedIn and Twitter.  

  • Kendal Lindstrom

    Kendal Lindstrom

    Ms. Lindstrom serves as an Elire PeopleSoft Treasury Associate Consultant, assisting team leaders in the development, configuration, and execution of the implementation process. Kendal refines and perfects details related to client needs to ensure complete satisfaction.


  • Jordan Hutchcraft

    Ms. Hutchcraft serves as Elire’s Marketing Associate, working to develop and optimize marketing brand assets. Jordan collaborates with the Elire Marketing Team to produce blog and social media content, strategize for social media expansion, and maintain Elire’s internal and external branding.

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