Instructor for this course
more

In this course we explore cash flow forecasting at its most basic level. We assume little or no forecasting experience by participants, or a desire to improve their cash flow forecasting.

We begin with a description of a common structure for cash flow forecasting and then fill in the pieces – information, sources, etc. – that are necessary for an effective forecasting system. We discover that most short-term forecasting methods are not complicated. We discuss how to identify potential sources both personal and computer. We break down data to explore how valuable the data items are to the overall forecast.

Acknowledging that we may not be able to find sources for all items, we introduce short-term forecasting methods that can be used in conjunction with estimates from “knowledgeable” sources. For example, some methods can be used to translate a data item to a forecasting variable. In this way we ask our sources to estimate what they know, and we can then translate the information into the form we need for the forecast. Finally, we gather up all of the pieces we identify and construct a basic forecasting template.

Intro Video Transcript

Welcome to the fundamentals of cash flow forecasting. This is been a special interest of mine to Treasury executive and consultant. I had three-plus years of experience with cash flow forecasting. I evaluated in revamped many cash flow forecasting systems. This course is intended for the beginner or someone who is taking over forecasting system and want to be sure the system is effective or needs fixing. Will take a look at broader issues and begin to explore different methods and approaches. Our focus is this course will be on the short terms. Senior financial executives who identified cash flow forecasting at a problem area for many years. A recent survey indicated over half of them question the reliability of their forecasts and feel this is an area needs improvement. In my experience I found the senior executives do not have clear-cut evaluation criteria. Their dislikes are vague, many just noted a town quote like their forecasts for trust the Treasury managers who prepared the forecast. Of course this makes it difficult to revise and improve the system. In one case a consulting client disgusted forecasting problems with me. The Treasury told me that it was often quote way off and wondered if I could build a model to replace the current method of gathering data from numerous sources. he also expressed his unhappiness with the preparer. I told him a model as possible as they had more than an updated seem predictable to me at first glance. My discussions with a preparer and a few sources however turned up a different problem. Communication. To prepare the forecast receive data from the sources but never reconnected with the sources when their estimates were off. This was a good as the treasurer for bed it not wanting to quote bother the sources unquote. So I offered him two choices, allow two-way communication with variance analysis are used to model a bill. He chose to do both and was happy with the result. In instances where the forecast is not well regarded senior executives impatiently try to fix the system quickly when they may just ignore it and ignore the forecast. Based on my experience in discussing forecasting problems with treasury staff and senior financial managers I see a distinct difference between what is expected by management and what is possible by staff. I call the former the irrational expectations on and the latter best to forecast can do. Obviously the wider this golf the more difficult it will be to resolve the difference between actual and desired and to develop an effective system. This figure shows the normal cycle for most forecasting systems. It typically starts when the sources of the forecast data send estimates for the forecasting period or periods. Note: the sources are usually people but they could also include other kept company systems. The data are compiled and reviewed by the preparer of the forecast. This case to prepare an early vantage point to be able to question data or follow up with sources that have problems so the forecast can be changed. From there the forecast is prepared and compared with actuals. This produces variances between the forecasts and actual data and these areas can be shared with sources to correct any errors or misunderstandings. This applies to people or systems. Someone has responsibility for the data input so that would be the appropriate place of contact and approach I have found useful in managing the expectations for forecasting system is to answer three fundamental questions. One can you really call your quote hunting and gathering unquote a forecasting system? Much of this depends on the performance of your sources so you need to be to objectively evaluate them. If you don't see a system it probably doesn't exist. What are you trying to forecast? This is harder than it sounds. I have looked at many systems and without scratching my head because I couldn't figure out what the forecast was supposed to be predicting. There may be lots of numbers but they should say something. For instance it is important to predict cash flows or to develop a model that reflects cash flows not just cash because the cash figures the net result of the cash inflows and outflows. Many financial managers lose sight of this important difference. Why are you doing this forecasting? If it's for you, you should have a good idea of what you need and where you're getting it. If it is for others, you'll have to find out what they're looking for and whether they're getting it. Bad forecasts can be worse than no forecasts. However you really cannot function without a forecast. there are several effects of bad forecast. If you experience one or more of the effects shown you need to take action. Primary impact is felt in your working capital. Creating uncertainty in our working capital management is handled can place a heavy financial burden. You become very limited in how much you can finance or even expect to receive on a regular basis you'll get too many surprises. As a result you short term investing in borrowing may be compromised. You can to investors shorter maturities sacrificing yield or borrow unnecessarily thereby increasing interest expense in the process. If you were a heavy borrower you can expect a lot of pressure from senior decision-makers calling for an accurate short-term forecasts. You may also discover that their excess funds in local accounts sitting idly because no one is no one tracks them. Finding a local funds can prove an unexpected cash inflow when they are discovered and transfer it to a point where they can be used. Over all your management of working capital suffers and penalize the company providing fast actions on attractive financial opportunities for getting hit adversely by changes in short-term rates.

Learning Objectives

  • Define the information requirements for a short-term (i.e., up to 1 year) cash flow forecasting system.
  • Identify how to perform an objective critique of an existing cash flow forecasting system.
  • Recognize when to use standard forecasting methods and how to evaluate their performance.
  • Discover how to develop an effective cash flow forecasting system that integrates various time horizons, data items, and performance measurements.
Last updated/reviewed: December 05, 2017

76 Reviews (226 ratings)Reviews

2
Member's Profile
Although I found the content of the course informative, the alternative answers for the questions in the multiple choice on the final exam were vague which ultimately require a deeper understanding of Mr. Parkinson's material than I had anticipated.
4
Member's Profile
Course was well organized. The information flowed. I was surprised to learn that basically 80% of employees are capable of committing fraud. The 60% out of the 80% was pretty alarming. All workers should receive this information.
4
Member's Profile
Mr. Parkinson made some good points which I can use in my cash forecasting. At some points I thought the presentation dragged. I thought the best part was when Mr. Parkinson used examples to illustrate his points.
4
Anonymous Author
I have forecasted cash flow in the past for two different companies and wish I had this course available to me then. I will refer back to it in the future when I have to forecast cash again.
5
Member's Profile
One of the best courses I've taken on Illumeo (20+). Great level of detail, good pace, good scope. All around great class for the beginner to intermediate cash flow forecaster.
4
Anonymous Author
Great overview of cash flow forecasting - something which I have not had to do so far in my career. Course had some great tips and reminders of how to do a forecast.
5
Member's Profile
Good presentation showing all the different terms, methods, reasons, rationale, etc., for developing and using cash flow forecasts, both short term and longer term.
3
Anonymous Author
A decent introduction for someone new to the cash forecasting arena although I found myself disagreeing with a few of the presenter's statements.
5
Member's Profile
Very good refresher course and questions raised in analyzing the different methods were very useful in developing critical thinking.
3
Anonymous Author
Would have like to seen a quick example of the results and variance analysis, but overall a good course given the time allotted.
5
Member's Profile
I thought this was a good introduction to financial forecasting. This was good for my new position using financial forecasting.
4
Member's Profile
The course was not bad although should give more examples and more interactive. Some parts also don't apply to my job as much
5
Anonymous Author
A very important and practical topic Well presented and explained. Helped in understanding other topics better as well.
5
Member's Profile
Pretty good introduction 101 to the topic in order to get a broad view about what is going on and where you can fail.
5
Member's Profile
A little slow during the videos but all valid points made. I would suggest this course to a finance college student.
5
Member's Profile
DEEP cash flow analysis here for the large enterprise. Ken has a detailed presentation and tips to get it right.
4
Member's Profile
Good principles, the presentation is somewhat dull but helpful to understand basics in cash flow forecasting.
3
Member's Profile
Nice basic level forecasting presentation. The information was presented in an easy to understand manner.
3
Member's Profile
I would have given a much higher rating if this course showed some actual examples, but there were none.
5
Member's Profile
For someone without a whole lot of experience forecasting cash slows, i found this to be very useful!
4
Member's Profile
A good description of cash forecasting. Some examples of sources could be helpful.
5
Member's Profile
Great course! Really enjoyed the lecturer's talk and how he spoke about cash flows.
5
Member's Profile
Easy to follow. Easy to understand broad understanding of cash flow forecasting.
4
Member's Profile
I like how the course was broken up, and how you are able to access the slides.
5
Member's Profile
Great review. Covered a lot of points to remember and implement as needed.
5
Member's Profile
I enjoyed this course and thought it was insightful to relative experiences
3
Member's Profile
Very basic course for someone that has not done budgets or forecasting.
4
Member's Profile
Great course overall..PDF slides could have included a bit more detail.
4
Member's Profile
Provides a great explanation on the material for a good understanding.
4
Member's Profile
Good introductory course, imphasis on simplicity and realistic
5
Anonymous Author
Very good course! Will definitely take the immediate course.
5
Member's Profile
Very conceptual, just what I needed to know for my business.
2
Member's Profile
I thought this was extremely wordy and slow at some times.
5
Anonymous Author
Tested my knowledge of cash flows. Good refresher session
5
Member's Profile
Very good overview of the fundamental concepts. Well done
3
Member's Profile
works for what i need to renew my cpa and cia licenses.
5
Anonymous Author
Interesting course on a topic not touched on enough.
5
Anonymous Author
Great course on cash flow forecasting for beginners.
5
Member's Profile
Very intuitive, easy-to-follow and helpful course.
4
Anonymous Author
Good refresher course with practical suggestions.
Anonymous Author
A bit dry but did have some useful material.
5
Member's Profile
Great explanation of purpose, the "why".
5
Member's Profile
I loved this course, very interesting!!
4
Member's Profile
Helpful overview and some useful tips.
4
Member's Profile
It could have been better explained
5
Member's Profile
Interesting topic, well explained.
5
Member's Profile
Great course! Very informative.
5
Anonymous Author
Solid course, fairly simple.
4
Anonymous Author
Well explained, great course
5
Member's Profile
Very detailed explanations.
4
Anonymous Author
Fairly basic, good overview
Anonymous Author
Good big picture overview
5
Anonymous Author
Nice refresher on basics
4
Member's Profile
Some helpful insight
4
Anonymous Author
helpful and enjoyable
4
Member's Profile
Was easy to follow.
5
Member's Profile
I liked the course
5
Anonymous Author
Very interesting.
4
Member's Profile
Fundamental course
5
Member's Profile
Very Informative
3
Anonymous Author
Basic overview.
5
Anonymous Author
easy to follow
4
Anonymous Author
Easy to follow.
4
Member's Profile
Great insight
4
Member's Profile
Great Lesson!
4
Anonymous Author
I liked it.
5
Member's Profile
Great Course
5
Anonymous Author
great course
4
Anonymous Author
Good course
5
Member's Profile
Good review
5
Anonymous Author
Good tool
5
Anonymous Author
Nothing
Anonymous Author
Cool
4
Member's Profile
good
3
Anonymous Author
...
5
Anonymous Author
m

Prerequisites

Course Complexity: Foundational

No advanced preparation or prerequisites are required for this course.

Education Provider Information

Company:
Illumeo, Inc., 75 East Santa Clara St., Suite 1215, San Jose, CA 95113
Contact:
For more information regarding this course, including complaint and cancellation policies, please contact our offices at (408) 400- 3993 or send an e-mail to .

1 QuestionCourse Questions and Answers

Member's Profile

Great lesson and very helpful.

Course Syllabus
INTRODUCTION AND OVERVIEW
Fundamentals of Cash Flow Forecasting
  12:39Establish a Base Line
  13:04Techniques and Methods
  17:50Have a Flexible Methodology
Continuous Play
  49:54Fundamentals of Cash Flow Forecasting
SUPPORTING MATERIALS
  PDFSlides: Fundamentals of Cash Flow Forecasting
  PDFFundamentals of Cash Flow Forecasting Glossary/Index
REVIEW & TEST
  quizREVIEW QUESTIONS
 examFINAL EXAM