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We can never say it enough, the cash flow plan is the key element of cash flow management. Forecasting the company's receipts and disbursements over a given period, it is an essential tool for defining the financial strategy to be followed in terms of investment, recruitment, borrowing, etc.
Unless the company is in the process of being created, a cash flow plan is based on the analysis of past performance on the one hand and the analysis of market trends on the other hand. However, past years only offer a small overview of the challenges you may face in the future, which itself is difficult to predict: emergence of a new competitor on the market, crisis impossible to predict, significant change in the environment, etc. by remaining with a traditional planning method you risk lacking the flexibility to respond to this type of issue. In 2020, many companies were shaken by the health crisis. Others had already relied on a strategy of scenarios designed at the start of the financial year and were able to turn around a little more easily. But what is it exactly?
Scenario planning is a method that has long been used in sectors such as agriculture and the military industry. It consists of formulating hypotheses on what the future of the company will be over a given period, depending on the evolution of its environment and its various mutations.
After having defined the time horizon of its analysis, the company must identify the main societal, economic, political or even technological trends that could impact it. From these trends, it is then necessary to define the main uncertainties, that is to say the events whose impact, while still uncertain, is likely to significantly affect its competitiveness. These uncertainties are then developed according to different themes, in several alternative scenarios which must be coherent and above all plausible. The goal is not to create science fiction but to take into account the risks and opportunities!
It is in the event of a crisis that the treasurer most needs to know the state of his liquidity and their availability in order to react very quickly. Since we cannot predict the future, we must consider it by creating several scenarios, from the most pessimistic to the most optimistic, to thus embrace all possible cases. Then, month after month, the scenario most in line with reality will emerge; it will then be enough to follow it or take it as a reference to adapt it and create new scenarios on this new basis.
It is utopian to hope to establish different scenarios and keep them up to date in Excel. To easily explore and model your scenarios in order to simulate the financial impacts of strategic decisions and their consequences on your cash flow, there is only one solution, and that is to automate your cash flow plans.
With NEOFI, say goodbye to multiple spreadsheets and time spent on manual reviews: create, simulate, refine and modify your scenarios with ease via an intuitive and easy-to-configure platform.
NEOFI directly integrates your data into its database to evolve your scenarios as events arise. You can also save your simulations to develop them later.
Finally, the tool is collaborative, which simplifies communication with your managers and facilitates the transmission of information within the different teams.
To find out more, visit the page dedicated to our cash flow forecast management solution!
