Cash Forecasting

Cash forecasting can be a valuable aid to the cash manager if it is prepared well and used properly. Where it is prepared badly, it can be a significant waste of time to all involved. In companies that make good use of cash forecasting it may be used as an aid for some, or all, of the following:

  • to set borrowing limits and minimise cost of funds;
  • to maximise interest earnings;
  • for liquidity management;
  • for foreign exchange risk management;
  • for setting and monitoring longer term investment and funding strategies;
  • for financial control;
  • to monitor and set strategic objectives;
  • for monitoring various lender and investor ratios;
  • for budgeting for capital expenditure and project appraisal; and
  • as a tool for working capital management.
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