· 2 min read
Your Cash Runway
Discover how cash flow forecasting prevents insolvency and ensures financial stability. Learn about how a Fractional CFO can help manage short-term cash flow.
It may seem obvious, but companies need to have a deep understanding of if and when they will run out of money. Insolvency is the inability to meet current obligations. Even though sales may be increasing, it is possible to run out of money for a variety of reasons. This causes unnecessary stress for everyone in the company, especially the Accounts Payable staff.
One of the primary duties of a CFO is to provide accurate cash flow forecasting. We are fans of CashFlowTool. This is an easy to use, Excel-based tool. It allows you to look at all incoming invoices and outgoing bills and see exactly what your cash balance is predicted to be.
Cash Flow forecasting is not the same as a longer-term strategic forecasting. Whereas cash flow forecasts are short-term, highly accurate tools with little uncertainty, a strategic forecast may be several years in scope and is by its nature uncertain. We’ll discuss strategic forecasts next week.
Because of the emotional effect of running out of cash, an accurate cash flow forecast is the most requested and appreciated service that Fractional CFOs offer. We will keep the cash flow forecast up to date and discuss it with you regularly.
If you are losing sleep over the possibility of running out of money, please contact us. We want you to sleep well at night.
