A cash flow forecast can provide you with a clear picture of when you can expect to receive cash and from where it will come, and when you will need to spend cash and what you will spend it on. Using actual commitments and making estimates based on solid data will help to make your cash forecast more realistic and useful.
Cash Flow Forecasts as Part of Integrated Financial Reporting
A cash flow forecast, in order to be useful as a management and control tool, must be based on real data and actual commitments. Historical data on which to base a cash flow forecast will be useful, but must be considered in conjunction with information from your business strategy and your budget in order to project a realistic picture of what to expect in terms of future cash flows as you move forward. And actual commitments, defined in terms of amounts and payment terms, will provide a firm basis on which to project cash flows.
In this sense, a cash flow forecast should be considered an integral part of an overall financial planning and control strategy. And there should be uniformity between historical financial reports and budgets and forecasts, in terms of format, types of accounts, and the level of detail to be presented. This way, the different financial presentations will be comparable, and taken together can be used to describe, evaluate and manage the operation using the same terms of reference, within the same parameters.