Cash flow and liquidity planning

| Blog 1 of 2 | 3 minutes read |

The way forward in times of great uncertainty!

In times of increasing uncertainty, it is vital to have information related to future cash and liquidity fast and accurately available. No company can survive or grow without profit, but it can also not survive if it isn’t able to pay its debts on time. This is exactly what a liquidity and cash flow plan do tell.

To effectively incorporate liquidity planning and cash flow planning is challenging for most companies. Although technology has made major improvements to collect, collaborate and analyze data, the increased financial complexity, regulatory requirements, globalization, challenges in integrating data models and processes have significantly increased the complexity for implementing effective liquidity or cash flow reporting processes.

In this blog we will describe what liquidity and cash flow plans are and how we can help you to implement these plans in your organization. In our following blogs we will focus on business benefits and added value of liquidity and cash flow planning and present examples of liquidity and cash flow planning with proven technologies.

Different types of planning

Depending on the type of industry and the way you have organized your operations, financial plans require different granularity levels. Planning horizons and frequencies for creating plans may differ.

In general, every organization should focus on visualizing the following two goals, though:

  1. Cash balances plus cash surplus or shortage from daily operations.
  1. Other cash or non-cash sources from investments, short-term and longterm agreements in relation to credit facilities or any other initiative that will have an impact on cash surplus or shortage.

To realize the above-mentioned goals and for the sake of clarity, we use the following definitions. Overall the following plan horizons can be defined:

A cash plan (1) is the current amount of cash at banks. Reports show the cash position from operations by bank account, in local currency and per company. The available amount of cash is the starting point for the liquidity plan (2). In this plan the focus is to collect cash and plan for committed and uncommitted short-term credit and financing facilities. When you also consider long-term financing and investment activities, you can derive a cash flow planning (3). Cash flow plans are typically accounting driven due to the fact that these kind of plans incorporate balance sheet and P&L related items (for example EBITDA corrected for interest, taxes, depreciation and amortization).

Cash and liquidity planning with CPMview

For most companies these planning processes are difficult to integrate, time-consuming and errorprone. Most companies only perform these reporting processes occasionally. The level of detail is often limited, insufficiently supporting to make the right and timely strategic and operational decisions. That is where we can help! We implement automated and integrated cash and liquidity planning, using proven technologies.

Based on our in-depth experience with the integration of cash and liquidity processes we can help companies in realizing fast and accurate cash and liquidity plans with proven CPM technologies