![]() ![]() So, when you’re developing a medium-term forecast, ![]() Many more remain uncertain (think revenues and tax remittances) as they’re tied to economic activity. Some cash flows, such as loan repayments and bondholder payments, are known and predictable. Why? Because the medium term is usually describing the period when payables and receivables are primarily forecasted from either budgets or previous years’ data rather than contracted procurement and sales. Medium-term forecasting is more difficult. There are two key items you need to think about here: flexibility and the cash flow implications of strategies designed to protect against the effect of rising interest rates. Paying the company’s suppliers, can you be more strategic? And finally, communications: what is the best way to communicate your insights to procurement, sales and the board? In terms of robustness of the supply chain, both upstream and downstream, what do these patterns suggest? When it comes to Look for patterns of change over the last two years of your short-term cash flows. That can be taken to change the ratio of fixed to variable costs, such as reviewing the funding programs that might be in place. Things you’ll want to consider include the variability of the company’s costs and steps ![]() If you want to see when working capital is tied up in inventory or AP, monitoring cash flows can help. ![]() With a clearer view of the underlying cash flows that constitute short-term forecasts, treasury can better make strategic decisions in the following areas: Short-term forecasts are always likely to be the most accurate. Up and supply chain issues added a level of uncertainty that was previously unknown. Start-ups are typically most concerned with this, but we saw many organizations start monitoring their burn rate during the 2020 coronavirus pandemic lockdowns as revenues dried Rate,” or the speed at which your organization uses up its cash. On the extreme end of this is identification of your “burn In order for a business to continue operating, the treasury team needs to understand the timing of cash flows so they can make provisions for raising funds - or placing funds in investment. We’ll talk about the different purposes of each period below, and provide you with some key points to consider that are unique to each one. There are three time periods used to develop forecasts: short-term, medium term, and long-term. Plans, or support greater efficiency in the organization’s use of working capital. Their strategic purpose comes into play when they are developed over a longer period of time, which could be due to a desire to develop medium-term funding, investment Treasury forecasts tend to be built on operational cash receipts and disbursements. ![]()
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