Cash Flow Forecast Time Intervals

Effective management of resources is crucial to run a successful business. Those resources include cash, brand, human resources, equipment, property, products, services, and inventory. Of all these resources cash is certainly the most important. If you have enough cash you can buy any of the other resources that are deficient in the practice. The first number a practice calculates in the management of cash is the cash flow. The optometry practice has the responsibility to make timely payments to suppliers when they are due. To plan with confidence that payments will be made in time and when they fall due, we rely on building a detailed cash flow forecast.
A cash flow forecast predicts the timing and the amounts of money receipts and payments. It warns us in advance of a cash flow shortage so that we can plan to bridge the gap in cash flow of any potential or critical need. If you want to understand how to compute a net cash flow I found a detailed article at Review of Optometric Business by Dr. Schultz and Dr. Fletcher called “How to Compute Net Cash Flow”. On the other hand, to construct a cash flow forecast, we compute the current cash balance and predict the receipts and payments that will occur within a set of time intervals. The better the quality of our prediction is, the better the quality of the cash flow forecast and its usefulness is. The cash flow forecast time intervals depend on what the cash flow forecast is meant to be used to. For example, a cash flow forecast is constructed for funding, operations, or strategic purposes.
When a cash flow forecast is being constructed for operational planning, it requires a near-term forecast that can be daily and for the week ahead or weekly for the next three months.
When a cash flow forecast is being constructed for funding or applying to bank loans, it requires making a monthly forecast for two to three years with annual totals.
When a cash flow forecast is being constructed for strategic planning it requires making yearly forecasts for up to twenty years.
Time intervals are also dependent on the strength of the net cash flow. If it’s strong, you can make a long time intervals forecast. When the net cash flow is weak, especially in times of crisis like the current period, you will have to make short time intervals forecast like weekly or even daily.