Understanding Cash Flow Forecasting

The cash flow statement 

The cash flow statement compares the total cash flow into a business with the total cash flowing out. 

In other words, the cash flow captures total revenues flowing into the business via cash or direct Bank deposits/transfers…

…and nets this amount off against all company expenditures in the form of cash/direct bank payments/transfers…to include such items as staff salaries, utility payments, stock purchases, fixed asset acquisitions and other investments.

What is the purpose of the cash flow statement? 

The cash flow statement provides a management tool to manage the company’s inflow and outflow of cash ensuring that at all times there is adequate cash resources to meet the company’s upcoming financial obligations.  

Additionally, over time the company will have planned investments, acquisitions and expansion plans…expansion of its existing products and service lines or expansion into new geographic markets. 

Keeping tabs on the Cash Flow ensures that the company is building the required cash surplus to execute projects such as these and others.

Who uses the cash flow?

As I have already mentioned, the cash flow has the very important purpose of ensuring the business is in a position to meet its financial obligations on a  daily basis.  

Depending on the type of organization, the following employees/stakeholders will have an interest in the day-to-day cash flow management of the business:

  • Treasury Manager
  • Operations Manager
  • Financial Controller
  • Marketing Manager
  • Chief Executive Officer
  • Board of Directors

The Treasury Manager –  from the standpoint of having the responsibility typically to prepare the report and ensuring that there’s adequate liquidity within the company to meet its obligations.

The Operations Manager – from the standpoint of the payables function and in ensuring that there’s adequate cash resources to meet the ongoing expenditures within the business.

The Financial Controller – in having the role and responsibility of funding investment projects, fixed-asset acquisitions, expansion of products and service lines or expansion into new geographic areas.

Marketing Manager – especially from their role in ensuring that marketing and sales campaigns have adequate funding.

Chief Executive Officer from the standpoint of ensuring that the business maintains a healthy financial state which is ably supported by tracking projected cash flows while ensuring actual cash positions to meet expectations.

The Board of Directors – Just as with the CEO, the Board is interested in the cash flow statement in seeing that the business is in a healthy financial position and is meeting its obligations as they become due.

Who Prepares the Cash Flow?

This will vary across organisations but typically, any of the following persons will have the responsibility for outputting the cash flow statement:

  • Treasury Manager/Officer
  • Operations Manager/Officer
  • Financial Controller/Accountant


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