What is the cash flow forecast? What is the goal of cash flow forecast?
From the perspective of corporate finance, cash flow forecasting is modeling the future cash liquidity of a company or an organization within a specific time frame. Cash usually refers to the total bank balance of the company, but in the forecast it is the cash balance plus the amount of short-term investments minus short-term debt. Cash flow is a change in cash from one period to the next (difference of 2 balances).
From the perspective of managers in small and medium-sized businesses, the forecast of cash flow is simpler, that is to see the amount of money that will be received / collected (in) to ensure that out-of-pocket payments can be managed to avoid them in excess of revenues. Entrepreneurs need to learn quickly that "cash is king" and, therefore, they must be good at cash flow forecasting.
The main objective of cash forecasting is to support an organization's cash management of cash and to ensure that the organization has the cash needed to meet its obligations (payment to the home). provide, pay staff ...) and avoid financial problems, better manage working capital.
Cash flow forecasting is important because if a business runs out of money and cannot afford new financing, it will become insolvent. Cash flow is the blood of all businesses - especially startups and small businesses. Therefore, it is important to manage what happens to the cash flow to ensure the business has enough money to survive.
