Cash is King – Why cash flow planning is a must

This is often due in large part to the fact that they have no process in place or have simply chosen the wrong planning tool. In this blog we will show you why an integrated reporting and planning solution is the best way for a company to improve its cash flow planning on the long term.

Companies that optimize their cash flow planning have a competitive edge. They can better manage liquidity risk and always know how much liquidity they have and where they have it. And it enables them to allocate capital more effectively, which translates into higher returns. However, the actual planning can take different forms and vary from company to company, with the greatest differences seen in the planning tools themselves. Many companies still rely Excel solutions, while others have software solutions that can’t even show all the components necessary for comprehensive analysis.

Integrating operational planning

The following are some of the most common mistakes in cash flow planning: Only profit & loss models are made, which means you’re focusing too narrowly on the income statement. Operational planning, and in particular demand and procurement planning (S&OP planning), as well as investment planning, all of which can have a major impact on the balance sheet and cash flow, are forgotten entirely. Many companies don’t include these components in the software analyses they use, with the result being that they are left out of the overall analysis. The consequences snowball and companies end up empty handed when it comes to management options and the relevant key performance indicators (KPIs) aren’t included in any performance analysis. Companies are thus unknowingly letting go of a crucial management tool for analyzing the effects on the balance sheet and cash flow, for optimizing finances and for being able to take the right steps at the right time. And exactly those things are necessary for integrated, driver-based planning.

Pooling KPIs into one application

What’s important for cash flow planning is an overall view of all key performance indicators. Even though many companies find it to be a difficult undertaking, the solution is quite simple. The right software solution is well equipped to handle the task of pooling the numerous positions. The only thing the application needs is access to the financial data of the company. This data is uploaded into the application and the software links all the relevant profit & loss and balance sheet positions with the cash flow positions. This ensures that balance sheet transactions are reflected in the cash flow. Every change to cash flow relevant profit & loss or balance sheet positions is mapped automatically.

The greater the transparency, the better the overview

Using reporting and planning software with cash flow data allows companies to create a transparent view of all KPIs. CFOs will then find it easier to identify the right KPIs, understand sensitivities (including currency effects and temporary liquidity bottlenecks) and use the information to optimize their cash flow planning. This gives them a new management tool with which they can improve the company’s financial positions and use the freed up resources for vital growth activities, such as new production sites, product improvements, investments, marketing, recruiting, etc.

Do you wish to know more about Apliqo? Klick HERE.

Related Posts

More resources

Gran Turismo 7 + IBM Planning Analytics / TM1 + Apliqo UX — How telemetry is relevant to running a business.

A few words on our recent data experiment with Gran Turismo 7 and how it demonstrates just how powerful Planning Analytics becomes with Apliqo UX.

Read this article
How telemetry is relevant to running a business

Why you should do a forecast post-mortem

Accurate forecasting is a severely underrated skill in modern business and one that you should be looking to improve if you want to maximize the value of your planning and analytics. But the only way to do this is to have a feedback loop where you can look back on the forecast methodologies that you used in the past and assess how they fared when coming up against the uncertainties of the real world. It's for this reason, that a forecast post-mortem can be such an eye-opening component of your FP&A journey.

Read this article

How Apliqo UX streamlines cross-department collaboration

Better collaboration starts with effective communication, not just verbally, but through the way that you visualise and communicate your data. Learn how Apliqo UX can help you improve your data storytelling.

Read this article

Unpacking 5 of the latest trends in business intelligence and analytics – so that you can level up your business

Let’s walk through five key trends to be aware of as you shape your business intelligence and analytics for 2023 and beyond.

Read this article
Unpacking 5 of the latest trends in business intelligence and analytics

How to improve your budgeting accuracy

Improving the accuracy of your budgets can have a significant impact on your company’s performance. Here are four ways you can do just that.

Read this article