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| 79.
Businesses Need Cash Flow Analysis And Plans To Meet Cash Requirements
| A critical requirement for all businesses is the estimation of cash flow and cash requirements. By developing the routine and discipline of performing cash flow analysis on a weekly basis and projecting cash requirements in detail on a week by week basis, a company can identify potential cash crunches before they occur.
This weekly reporting approach forces the company to look at their receivables, payables, payroll, and capital expenditures on such a regular basis that spikes that previously would have been unanticipated are not only recognized in ample time but can be provided for in most cases because of the long lead time management has to react to cash needs.
While I like to see cash projections in detail on a week by week basis, certainly for 13 weeks, it is essential to also project cash requirements for the remaining three quarters of the year and to roll this estimate every week so management is always looking out at least a year.
While it is a bit of a bother to establish this discipline and set the reporting procedures, within just one month. It will be easy to see that the pay off is enormous. |
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