Posts

liquidityriskanalysis

Nobody likes a budget that is far off target, especially when it could result in a liquidity crisis. Luckily, most companies rarely have to experience such a stressful event. Although, in a turbulent economy where interest rates and stock indexes move up and down like yo-yos and news about corporate layoffs are part of daily news headlines, strong financial clarity does not seem like a bad idea.

So, what does a cash flow forecast mean to most people?

Here is a definition: A cash flow forecast is a plan that shows how much money a business expects to receive in, and pay out, over a given period of time. 

Based on the definition above, it seems logical that all businesses should have a cash flow forecast perfectly ingrained in their corporate processes, but is that the reality? Let’s take a closer look at this.

Are All Businesses Doing Cash Flow Forecasting?

As much as it seems to make perfect sense to have a good estimate of your future cash outflows and inflows, many companies never get around to doing it. This is especially true in small and mid-sized businesses. Some of the reasons for the lack of cash flow forecasting models are the following:

  • The finance staff don’t have time to prepare it
  • Lack of tools that automate cash flow forecasting
  • Complexity in creating a good cash flow model
  • Lack of accuracy in past models leading to reduced appetite to repeat it
  • Other business tasks or fires keep executives focused in other areas
  • The financial planning team is exhausted after then annual budget process with no time or motivation to re-forecast the budget during the year

Regardless of the reason for not doing a cash flow forecast, healthy cash flow is the lifeblood of all businesses, so there is no lack of motivation.

Let’s look at the potential benefits of accurate cash flow forecasting.

Why Do Companies Want to Project Their Future Cash Outflows and Inflows?

Most executives know they would sleep better at night if they had a mechanism that fairly accurately could tell them if the liquidity of their business is healthy or not in the months ahead.

Below is an example of a report using simple color indicators and charts to help managers analyze the company’s projected cash position based on underlying cash flow forecast.

liquidity risk analysis

There are several very logical reasons why a company can benefit from regular cash flow forecasts, including:

  1. Reduce the risk of insolvency – by having a clear idea of any upcoming liquidity issues, management can react early and avoid drama and stress
  2. Move faster on investment opportunities – if you, thanks to a cash flow forecast, early on know that the business will be flush with cash in the months ahead, you can start planning acquisitions, down payment of high interest debt, purchases of strategic capital assets, etc.
  3. Satisfy bankers to enable debt financing or other bank-backed financial transactions

In other words, solid cash flow forecasts can be of tremendous value to a management team. However, if many financial teams dread the additional work of doing planning and performing a cash flow analysis, how can companies still get it done?

How to Automate Cash Flow Forecasts?

As in many other cases, technology can help automate laborious tasks. In the case of cash flow forecasting, there is a cloud software category often referred to as Corporate Performance Management (CPM) solutions that includes vendors such as Adaptive Insights, Centage and Solver that specialize in planning, budgeting and forecasting.

Benefits of CPM tools include scenario forecasting to predict “great”, “good” and “bad” scenarios so managers can plan accordingly. In other cases, CPM solutions provide entire driver-based forecast processes. Driver-based means that the forecast includes assumptions that help automate and simplify creation of sales, payroll, expenses, balance sheet and cash flow forecasts.

Sometimes managers don’t have the time or the need for a full forecast to analyze projected liquidity, in which case they can use simulation models to quickly adjust elements of their cash outflows and inflows to see the impact on the cash position as seen in this example:

cashflowanalysis

Most executives would agree that accurate cash flow forecasts provide numerous benefits to their business. During economic turmoil cash flow forecasts can help lower the risk of running into liquidity problems and increasing the chance to be ready to jump on investment opportunities. Regardless of the motivation, there are good tools available to help automate and simplify such financial planning processes.

At Solver, we offer Corporate Performance Management Solutions that help you establish cash flow forecasts and analyses and prepare for uncertain times. Contact one of our expert team members to learn how we can help you improve your cash flow processes.

Contact Us Today

financial planning analysis blog

The rapid growth of Microsoft’s Dynamics 365 Business Central (D365 BC) cloud ERP system comes with investments in add-on app solutions by independent software vendors (ISVs)For example, Progressus is a company as described above and has a project solution for D365 BC. With Progressus, small and mid-sized companies receive easy-to-configure and advanced project accounting functionality in the cloud. 

However, as all project-centric business managers know, good transactional systems also need proper financial planning and analysis tools. In today’s highly competitive market, this can be the difference between success and failure.  As successful project-based companies invest in new cloud-based ERP systems like D365 BC and add advanced project apps like Progressus, a natural next step after the implementation is to look for an integrated and flexible reporting and planning solutionA reporting and planning software like Solver can operate down to the detailed field and dimension level in the Progressus tables inside the ERP system.  

Project Reports for D365 and the Progressus App

Lately, most companies prefer pre-integrated solutions. Due to this, Solver partnered with Progressus and now the corporate performance management solution delivers an out-of-the box integration to both Dynamics 365 Business Central and Progressus. Solver not only provides D365 BC customers with a strong financial reporting and budgeting software for general ledger and sub-ledger data, but it also now extends this functionality into all the project detail provided by Progressus. 

Customer Benefits:

  • Pre-built integration to Dynamics 365 and Progressus tables
  • Pre-built Progressus Project reports
  • Full report writer with Excel design
  • Optional Budgeting module
  • Multi-tenant Azure Cloud Platform
  • Pre-built Power BI integration for interactive Dashboards

However, as with any reporting solution, pre-built report templates speed up deployment when can be used as a starting point. 

Solver offers a number of project-focused reports for Progressus including:  

  • Benchmarking
  • Project Manager Benchmarking
  • Project Capacity by
    • Customer Group and Resource
    • Department and Resource
    • Customer Group and Resource
  • Project Detail by Customer
  • Project List
  • Resource Detail
  • Actual vs Budget Variance

 

project capacity

project 2

Both solutions are independently integrated to Microsoft Dynamics 365 Business Central. After the partnership between the two companies, they decided to configure a joint integration. With the rapid growth in popularity of cloud ERP software like D365 BC, one of the next big cloud drivers is that ISVs, such as Progressus and Solver, work together to give customers elegant integrations across both standard ERP data as well as transactions originating from ISV add-ins to the ERP systems. This eliminates many of the custom integrations that are configured in the old on-premise platforms.

Technology is driving major industry changes into the next decade. Project managers and executives will need and demand complete insight to their data to drive faster and better decisions. Cloud-based ERP vendors and ISVs are making good strides to make this happen!

Payroll-Now-Blog-Picture-1200×675
BudgetingForecasting_01

This article will provide insight into some of the key features you could expect from modern corporate performance management (CPM) solutions.

Cloud-Computing-Concept.-The-Future-Everything-from-Socket

This article focuses on modern cloud-based reporting using BI360 as an example of a solution that is affordable and enables companies to make better business decisions.

PowerBI_Dashboard_01

This article focuses on the best of both worlds: a world-class reporting solution and a leading visualization tool.

Ascendfam-1200×800

This year’s BI360 Partner and Customer Conference, Ascend 2019, has proverbially sailed into the sunset. And it was amazing!

Read more

shutterstock_74784901-1200×1200

This article will focus on the benefits of partnering with a company that offers a corporate performance management solution as a product.

Image taken from Shutterstock.

Read more

SocMed-Ascend-Journeyv2-1200×630

New Conference Name…Same Awesome Location…Better Learning and Networking
journey band at ascend 2019 #bi360con
Read more

Back-view-image-of-businessman-with-arms-crossed-behind-head

This article will help you navigate budgeting and planning with corporate performance management solutions.

Man in suit looking at analytics for his budget and planning project

Image taken from Shutterstock.

Read more