When a company is experiencing severe financial distress, meeting its day-to-day and week-to-week cash and other financial obligations is a huge problem. The more serious the situation, the more important it is for the company's decision-makers to utilize perhaps the most essential of all troubled-business planning tools...the 13-week cash forecast (TWCF) model. Helping clients design and implement a TWCF is one of my favorite service offerings, primarily because of the immense relief it can offer frazzled business owners and managers who are operating "in the dark" due to insufficient cash funds. In short, a well-designed and regularly-updated TWCF model provides management with decision-making information regarding:
- When, and from what sources, cash is expected to be received, and opportunities for accelerating cash receipts;
- When, and for what purposes, cash is expected to be spent, and opportunities for delaying and renegotiating expenditures;
- Advance recognition of expected cash shortfalls, and opportunities for obtaining new and/or renegotiated debt and equity financing.
A properly-prepared and maintained TWCF model offers relief in troubled-business situations because under the "knowledge is power" concept, the tool serves as a road-map for those responsible for navigating turbulent periods of cash shortages.
For more info: 13-Week Cash Flow Model Creates Clear Communication Channels