This glossary uses Visual Finance™ to bring financial terms to life. Each example shows data from the Round Number Company, a fictional business with simplified figures to make learning easier. For more details, visit 'How to Read Visual Finance'.
The Cash Flow Forecast is a projection of the cash flows, in and out, over a fiscal period of projection, to determine net cash balances at particular points in time. This identifies either the need for additional cash infusions or the opportunity to use excess cash elsewhere.
It is a tool for analyzing the timing and severity of your cash flow problems and allows you to address the following:
After you have completed your strategic plan, you will want to know if it can actually work - whether you have the cash flow to support it. If you do not have the cash, you may go bankrupt, even if you have a profitable business!
Cash Flow Forecasts can also improve your ability to borrow. They give you advance warning of a cash crisis, so you know the best time to take out a loan.
The above is our generic explanations of common corporate financial terminology. Actual meanings can vary widely from company to company; in order to have the correct internal definition you need to ask your Finance Department, "What do you mean by that?"