FBC 147 Spacecoast Ad:Layout 1 6/29/10 8:48 AM Page 1
Once You Know Available Re sources,
What’s the Next Step? Forecasts can be more effective when they are focused on
underlying inflows and outlays rather than on aggregate net cash flow. At a minimum, segregate and evaluate primary cash flow components, including lockbox re ceipts, supplier payments and payroll. Once primary components are established, consider how
to focus your forecasts. Is historical trend analysis a lone sufficient? Should you consider fundamental analysis of key events/dependencies? This requires combin ing a focus on data with discrete business analysis. Examples include known payroll cycles, check run frequencies and loan payment commitments. You might look at day-of-week and day-of-month
dependencies. For example, day-of-week collection patterns of a typical lockbox operation may show large concentrations of Monday deposits. You may also want to con sider day-of- month patterns, noting deposit concentrations surrounding the dates that follow statement-based billings. Consider the merits of a fundamental view of primary
customer/vendor terms and behaviors. Focus on major trading partners and assess behaviors that stray from long-stand ing practices. Once you improve your under standing of primary cash flow components, residual balances can be addressed through more simplistic historical trend analysis.
How Do You Improve Your Process? There are a number of steps you can take toward
continuous improvement, such as a regular variance analysis in your cash flow forecasting procedure to determine how accurate the model was. Consider:
1 2 3
Evaluating the impact of unusual or unex pected events during the time period.
Analyzing variances between the forecast and actual outcomes to determine if modifications are needed in your process.
Discerning how structural changes may impact historical trends. These can include changes in customer behaviors, postal sys tem initiatives and payment system evolution. If you recognize structural changes or trends, consider a heavier weighting to more recent data observations. Companies that succeed in accurately forecasting cash flow
have harnessed a powerful engine for growth. For more on the topic, visit
www.pnc.com/ideas. u This article was prepared for general information purposes only and is not
intended as legal, tax, accounting or financial advice, or recommendations to buy or sell securities or to engage in any specific transactions, and does not purport to be comprehensive. Under no circumstances should any information contained herein be used or considered as an offer or a solicitation of an offer to participate in any particular transaction or strategy. Any reliance upon this information is solely and exclusively at your own risk. Please consult your own counsel, accountant or other adviser regarding your specific situation. Any views expressed herein are subject to change without notice due to market conditions and other factors.
Dana Kilborne, CEO; Ben Malik; Joyce Williams; Peter Rochester
Prime Bank is now Florida Bank of Commerce
New Name. Familiar Look.
Same Great Bank.
MELBOURNE • MERRITT ISLAND • ORLANDO KISSIMMEE • LAKE MARY • WINTER PARK
www.fbcbank.com spacecoastbusiness.com 0CTOBER2010[71
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