Cash Flow Forecasting: A Hands-on Approach

cash-flow forecasting book

Cash flow forecasting is a perpetual problem area for financial executives and their staffs. They often question the reliability of their forecasts, even as they use them for important financial decisions from handling current cash needs to financing longer-term projects.

Now, help is here! In his new book, Ken Parkinson shows you how to set up a cash flow forecasting system that handles everything from daily to yearly forecasting using Microsoft Excel worksheets. You don't need a statistical background or an elaborate software package.

“I have been in cash management for 55 years. At last, we have a book that enables the readers to understand and tackle the task of cash flow forecasting for their companies.” Norm Appleman

Forecasting as technique

Organizations of all sizes and in all industries benefit from good, efficient cash flow forecasting. However, many ignore the fundamentals that are explained in this book. For example, many forecasting systems don’t work well because they focus only on the cash balance, ignoring cash flows, or get confused with accounting or budgeting reports.

A successful cash flow forecasting system integrates the daily, weekly, and monthly forecasts into one system. By linking shorter-term forecasts to longer-term forecasts, financial managers can monitor cash levels, time their investments and borrowings more efficiently, and plan for future needs with confidence.

In this book, Ken Parkinson shows you how to develop daily, weekly, monthly and longer-term forecasts. He explains the uses of the various forecasts, why they are important, and how to customize them for your organization. And he makes the book even more useful by showing you how to use variance analysis to improve your forecasts over time. More than 30 spreadsheet exhibits allow you to follow the text, step by step.

“This small text is an easy read, yet filled with straight forward and easy-to-find solutions to cash forecasting problems. Whether the reader is a seasoned cash manager or a CFO looking for a solution to a newly identified cash forecasting problem, this book is a must. . . . I recommend it to everyone who wishes to profess a working knowledge of cash management.” Karl E. Rapp, Treasurer and Manager of Accounts Payable, Travel, and Treasury, Babcock & Wilcox Y-12, LLC

Forecasting as art

Forecasting is not easy if you do not spend enough time learning about the interaction of various financial and nonfinancial systems and the information demands of your environment. People can make or break your forecast. The more you depend on others to supply needed data, the more you need their cooperation and good communications. Very few effective short- or medium-term cash flow forecasts can be created entirely within treasury.

Throughout the book, Ken Parkinson includes ways to improve the data you collect from your sources. He discusses finding better data sources, how to counteract hostility and enlist cooperation from different departments, how to determine what data is sufficient and how to find logical alternatives. His suggestions are practical and useful because they come from experience.

Results of cash flow forecasting

Cash Flow Forecasting: A Hands-on Approach enables financial managers to develop effective cash flow forecasting systems. Maintaining a successful cash flow forecasting system requires continual monitoring, repeated fine-tuning, and the ability to absorb and learn from errors. But the benefits are worth it. They include smoother treasury management operations and better financial decisions by financial managers and senior management. Ultimately, the benefits of good cash flow forecasting flow directly to the bottom line.

“Cash Flow Forecasting: A Hands-on Approach . . . is not a one size fits all approach. The book provides many concrete formats and suggestions, but clearly emphasizes the art vs. science aspect in developing a cash flow forecasting tool. . . . Treasury professionals need to cultivate a broad understanding of their business operations and the cash cycle in order to develop and present a credible forecasting tool that can be recognized as useful throughout any organization. As a CFO whose early career experience is rooted in treasury, I continue to be surprised by the number of companies who either take an accounting approach (sources/uses of funds) or alternatively, treasury professionals who . . . do not use a cash flow forecast as a key tool in helping to plan strategy or business decisions.Trying to manage any business without an appropriate cash flow forecast is like driving down a dark road without headlights you either have to proceed with great caution (leaving lots of value on the table), or the risk of a crash (bad surprise) is very high.The book takes the reader through key decision points in developing a forecast, and outlines how short, intermediate, and longer-term forecasts can be key value-added decision making tools for all levels of management, from Treasury to the CEO. The cash flow forecast is one of the treasury managers best means to get a seat at the table as a member of any senior management team and this book will help you accomplish that.” Ware Grove, SVP, Chief Financial Officer, BIZ, Inc.

Check out the Table of Contents (pdf) and a chapter excerpt (pdf).

If you are interested in purchasing templates for 32 of the spreadsheets used in the book see the Cash Flow Forecasting Templates.

The book and the templates are also available as a Cash Flow Forecasting Package.