From XU Magazine, 
Issue 32

Cash flow forecasting: Finding clarity within uncertainty

Where money flows, business grows. A widely known statistic is that more than 80% of small businesses have to close their doors due to poor cash flow management. As businesses face mounting pressures of post-pandemic challenges, inflation and economic uncertainty, this figure has the potential to grow higher still.
This article originated from the Xero blog. The XU Hub is an independent news and media platform - for Xero users, by Xero users. Any content, imagery and associated links below are directly from Xero and not produced by the XU Hub.
You can find the original post here:

Why is cash flow forecasting important?

Cash flow can save a business from having to close its doors, help to raise capital or aid in refinancing. Good cash flow forecasting enables accountants or CFOs to predict income and consider a pessimistic, realistic and an optimistic estimate. It helps to understand possible future situations and catch any potential surprises before it’s too late to change course.

More than simply keeping a business afloat, accurate cash flow reporting and forecasting can also help a business move from strength to strength, cleverly re-investing funds when there is excess and holding tight when needed.

What does Spotlight Reporting do differently?

Spotlight Reporting brings years’ of experience and understanding of best accounting practices to forecasting software. We’ve created three-way cash flow forecasts to help users make decisions with confidence. Our forecasts take into account Profit & Loss, Balance Sheets and Overall Cash Flow, providing the option to tap into different budgets and scenario forecasts.

Our cloud-based software and integration with leading accounting firms ensures greater ease of use, while our tools touch on everything from ‘what-if’ evaluation and blue sky thinking, right through to more detailed unit-based drivers. This includes building blocks to forecast revenue. clearly defined costs, and potential successes of the business. Visuals such as graphs bring this information to life.

Spotlight Reporting’s features enable users to:

  • Compare: Create up to 30 different budgets or forecasts to see how different scenarios play out.
  • Consolidate: Forecast groups of up to 75 entities with multi-currency and include inter-entity eliminations.
  • Adjust: Create and edit forecast values including bulk adjustments, formulas to link and calculate account values, and the ability to utilise driver-based forecasting.
  • Calculate: Understand costs by inputting data around payment timing rules, loan amortisation and tax schedules.

Sharing vital information

Cash flow forecasting is vital in helping improve governance and investment, add value to firms and clients, and ultimately make confident and informed decisions.

Martin Aitchison, Director at Stepping Stone [see blog], experienced first-hand the power of forecasting. He often uses Spotlight Forecasting for one-off funding projects for clients looking to grow their businesses. Martin says his clients are  often so impressed with the level of insight he can offer that they then retain Stepping Stone for other accounting and advisory services. 

“I’ve taken on a couple of new clients as virtual CFO for that very reason,” says Martin. “The Spotlight Forecasting tool has been invaluable for me.”

According to Martin, the reports he creates are professional enough to be submitted to banks and investors, and save him the time and effort of trying to produce something similar in Excel – which often isn’t possible anyway. Reports can also combine historical and future numbers in one place, which is vital when applying to investors or lenders. Martin uses the analogy of driving a car to illustrate his point: 

“You don’t constantly look in the rearview mirror,” he says, “you have to look at what’s happening tomorrow as well. I use Spotlight Forecasting with all my CFO clients. It’s a tool I really recommend to people.”

Continual improvements for greater benefits

At Spotlight Reporting we continue to develop and evolve our services in order to improve convenience, speed and usability. For instance, we’ve recently made a number of improvements to the Forecasting Task Manager. 

Drawing on our continually expanding knowledge of what our users want and need, we’ve added functionality around creating tasks, connecting a data source, and taking actions on tasks:

  • Creating tasks: The upper limit of tasks has now increased from 7 to 30, and it’s quicker to create a full Three-Way Forecast or a simple Profit & Loss Budget.
  • Connecting a data source: With a more logical starting point, users now find it easier to work through the data import process.
  • Quicker actions on tasks: We’ve made it faster to create a copy of an existing task to use as the base for a new task, and delete any task that is no longer needed.

When done right, cash flow forecasting is a powerful tool to both reduce risk and boost the chance for sustainable success. Cloud-based software tools are changing the game and taking forecasting abilities to a new level. While we can’t tell the future we can draw together the threads of information we have, here and now, and use this picture to guide our way forward.

Why leave it there?

To find out more about Spotlight Reporting

Straight to your inbox

Subscribe to our newsletter for updates as they happen
We hate spam too. We NEVER sell our mailing list.
Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.