b'YOUR TOOLKIT FOR BUILDING EXCELLENCEby the nature of the market. And theres yet a thirdreliable foundation for future forecasts. Whatever the driver of higher costs: a wage spiral resulting fromestimates for what lies ahead, businesses can obviate the pandemics softening effect on the labor supply. cash squeezes by accelerating accounts receivable and Forecasting Cashflow stretching accounts payable. For the former, experts Of all the steps businesses can take to mitigate theadvise running regular aging reports. How much do bottom-line effects of inflation, the most importantcustomers owe in increments of two weeks, 30 days, is better management of cash flow. Inflation tendsand 60 Days? Any growth in the numbers over time to accelerate the drain of money from companymight indicate a steady deterioration of cash flow.coffers, and throttle the flow that comes in. If leftKeeping in close touch with customers can also help unaddressed, these battling trends can gut profits andaccelerate receipts by providing opportunities to threaten business survival. request timely payments and helping spot nascent Experts advise looking at the coming months withissues that may grow into future roadblocks. an eye toward estimating what will happen toMaintain a good handle on what customers are cash balances. Proactively managing cash flow isdoing, said Anderson. What are their future sales critical right now, said Lisa Anderson, presidentactivities? Are they encountering problems that may of LMA Consulting Group, Claremont, CA (lma- affect operations?consultinggroup.com). This can be done by runningNot all customers are of equal importance, and its periodic forecasts. What I would recommend issmart to concentrate efforts on the most profitable. looking at your demand-side and asking, What areAccount reviews can identify which customers we really going to need here? And then looking atshould receive the most attention. So much of the your supply side and asking, What will I have toimportant information required to monitor cash flow make? And then determining what the answers meanis tied to a selling cycle which varies by customer, for cash flow. If its going to be negative, you bettersaid Frank Cespedes, Senior Lecturer at Harvard borrow some money. Business School. Some buyers say yes or no when Such analysis, of course, involves estimates of futureyou make a call; others require multiple iterations revenuesa practice tainted by uncertainty. Havingof proposals. Some buy what you have in inventory; a sales forecast is great, but that doesnt mean you willothers require customized items. Those things affect collect all the money you think you will, said Scottthe time to receive cash and the cost to fulfill orders. Beaver, Senior Product Marketing Manager at OracleGood account reviews unearth that information.NetSuite. And even if your sales forecast is a hundredCompanies might also explore requiring bigger percent accurate, will the expected timeframe bedeposits from customers, said McQuaig. Sweeten the met? What determines cash on hand is not sales butincrease by emphasizing customer benefits. Maybe collections, and history shows that during inflationaryyou already have some needed material in inventory times customers start paying slower as a result of theirthat the customer can actually come and see. Or offer own cash squeezes. free early delivery so the customer can maintain the Planning must reflect the reality of cash flowmaterial on site. Emphasize that earlier payment helps uncertainty. Growing accounts receivable can put athe customer avoid higher prices later.serious strain on smaller businesses that may not haveAs for the outward flow of cash, a tried-and-true the cash reserves to absorb delays in receipts, saidtactic is delaying the payment of monies owed. Beaver. For most companies, cash flow forecasts areGood financial management on the buy-side has less than 75% accurate. One approach to anticipatingalways stretched out payables, said Cespedes. This likely variables is to look at historical performance.is particularly so in an inflationary environment What percentage of receivables is usually collectedwhere businesses must pay a lot more attention to during slower seasons? That figure can be appliedthe payment cycle.to open receivables to help estimate the likely paceStretching payables can, of course, backfire. For of receipts. starters, it can mean the loss of the 5% or 10% Faster Receipts discounts many companies offer customers that Historic data, of course, may provide a less thanpay before their due dates. It can also result inFRAME BUILDER - NOV2022 / 41'