What to do about a cash forecast
A forecast shortfall is a warning with time to act. Weigh the options, test a fix in the budget and keep the forecast up to date.
Task 1A warning in good time3 questions
The point of a forecast is time. A shortfall seen two months ahead can be planned for. One seen on the day cannot.
- Bring cash in sooner: bigger deposits, faster chasing
- Push cash out later: put off a purchase, agree longer terms with a supplier
- Borrow: a loan for a machine, or a higher overdraft limit agreed in advance
- Put more money in: new capital from the owner
It is May. Saltmarsh's budget shows the account over its overdraft limit at the end of July and August, after it pays £14,000 for a spindle moulder in July.
Task 2Testing a fix3 questions
Task 3Keep the forecast alive3 questions