Weathering the Storm Part 3: Re-forecasting Tips

  |  June 1, 2020

A company’s ability to effectively analyze net-working operating accounts and key indicators is critical to gaining timely visibility into cash flow. Atlantix Partners leverages data analytics and dashboards to obtain predictive indicators, but today’s economic conditions have made this more of a challenge.

Here are a few tips to start a solid re-forecast of cash flow:

  1. Adjust historical trends by contacting trading partners to understand their current economic situation
  2. Analyze the last 12-mon activity on a monthly basis starting with working capital accounts and develop an old fashioned roll-forward
  3. Expand beyond historical KPIs and ratios to better understand actual trends. For example, DSO can be calculated multiple ways. How are you calculating it and is it representative of how your business is performing?
    • Use Best Possible DSO estimates, incorporate Weighted Avg and the Count-back Methods of calculating DSO for greater visibility.
    • Calculate inventory turns and include Days Sales of Inventory (DSI).
    • Develop an A/P EVM model to adjust payment strategies and maximize liquidity.

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