Cash flow forecasting in a rapid-change era

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Note from the editor

Under the best conditions, forecasting cash flow is hard. When the pandemic hit, forecasting became nearly a guessing game. That’s because historical data became almost useless.

But as planning specialists like to say, having an incorrect forecast is better than having none at all; you need to have something to improve as you move forward. 

Although the pandemic is still with us, with the rise of Delta and other variants waiting in the queue, another massive shutdown is unlikely. That should make it easier to get a relatively good look at your cash picture in the months ahead. But one thing is clear: how you will be generating your cash going forward is almost certainly different — in big ways or small than how you generated it before COVID-19.

That’s because few companies escaped the need to generate more revenue online. And even for those whose business model from the outset was built around online sales, the need to expand offerings was a constant.

So, less relevant historical data combined with new ways of generating revenue are two factors your team must wrestle with as you devise ways to forecast your cash position. To help you in your task, we’ve compiled a handful of stories from CFO Dive that touch on cash flow forecasting in some measure. We hope the selection gives you ideas for how to approach the task in your organization.

Robert Freedman Editor

Forecasting cash flow under volatile conditions

Not getting the forecast right can lead to a cash crunch and, if the business is for sale, make it harder to close the deal.

• Published Aug. 16, 2021

Direct method touted as best way to forecast cash flow

The traditional indirect method, while necessary for financial reporting, isn’t well-suited for planning, finance specialists say.

• Published Aug. 16, 2021

Leveraging cash flow's multiplier effect on valuation

Most finance tools are optimized for GAAP but they can be made more effective for increasing company value by enabling better cash management, finance leaders say.

• Published Aug. 16, 2021

Getting EBITDA and free cash flow right in credit deals

These non-standardized measures are important but because they mean different things to different people, they should be used carefully in credit raises and other contexts.

• Published Aug. 16, 2021

5 signs you're about to run out of cash

Cash is surprisingly hard to track, and knowing when it's about to run out is harder if you don't know the warning signs.

• Published Aug. 16, 2021

CFO KPI Close-up: Cash flow

When the economic outlook is cloudy and grim, "cash is king" rings 10 times truer, CFOs say.

• Published Aug. 16, 2021

Cash flow forecasting in a rapid-change era

Forecasting cash flow is hard under the best conditions, but when the pandemic hit it became nearly a guessing game. However, as planning specialists like to say, having an incorrect forecast is better than having none at all; you need to have something to improve as you move forward.

included in this trendline
  • CFO KPI Close-up: Cash flow
  • Leveraging cash flow's multiplier effect on valuation
  • Direct method touted as best way to forecast cash flow
Our Trendlines go deep on the biggest trends. These special reports, produced by our team of award-winning journalists, help business leaders understand how their industries are changing.
Davide Savenije Editor-in-Chief at Industry Dive.