Cash Management for Business – A Best Practice – Part 2

Jessica Madison
May 11, 2023
Cash Management for Business

Why forecast weekly cash in good times when a business has plenty of cash?

In part 1 of this series, we discussed the fact that the best accounting departments forecast mid-term cash for their business. A mid-term cash forecast is a weekly cash forecast. Many businesses only forecast weekly cash when cash is tight, but why should a business forecast in the good times?

First, it’s a good habit and habits represent a healthy activity for the long-term. If a business is in the habit of preparing weekly cash forecasts, then they will be more prepared and will “see” potential issues looking out 12-weeks in advance.

Two, as we mentioned in part 1, it forces the operators of a business to know the details. Stop and think about this. Do you know which customers have outstanding invoices? Do you know your average monthly expense run rate and the vendor details? Are there one-time expenses that will change the cash outlook? Weekly cash forecasting creates a discipline of knowing and managing these details.

Three, weekly cash forecasting is the only way to manage and hit cash goals. Businesses have sales and profit goals. Cash is a critical goal too! Cash goals help achieve other business goals. For small businesses, paying down credit card debt. For larger businesses, managing bank credit facilities. And for all businesses, cash to grow the business. Inventory needs and acquisitions.

Think about cash movement from week to week and how it can impact a business’ cash balance. And picture it. See below.