Daily Cash and Weekly Cash Reforecaster

It’s been said that an entrepreneur is someone who works seven days a week, fourteen hours a day, and is always running out of cash. This characterization is sometimes true, but it doesn’t apply only to entrepreneurs; many professional managers run out of cash, too. The problem might be that they lack the tools to head off this problem—namely, a daily cash report and a weekly cash reforecaster.

Know Your Cash Position

To stay on top of your cash position, simply glance quickly at the daily cash report each day to see where you stand on total borrowings and your maximum available line of credit. Your “cash headroom” includes both available cash and the amount of credit available, and by reviewing the daily cash report daily, you’ll know when this headroom gets too tight so you can make corrections. Perhaps you need to look at the day's sales outstanding on receivables. Check into inventory turns and take corrective action before there’s a cash crisis.

The Weekly Report

The weekly report is a way to reforecast cash flow for the coming week using current forecasts, anticipated receipts, and scheduled disbursements for each day. It then includes the same anticipated transactions for each of the next four weeks.

Entering the actual transactions each day for a week and then repeating the exercise for the next week will help you learn your company’s pattern of cash flows, improve forecasting, and build your ability to anticipate cash crunches. In practical terms, it will provide the information you need to manage cash inflows and outflows more effectively, helping ensure that your company never runs out of cash.