3 Tips for Cash Flow Planning (#1 Courage)

During a COMMITLY demo, we philosophised with one of our customers about planning in general and cash flow planning in particular. I would like to record a few points from that fascinating conversation here:

3. Step away from the operational level

Watching open items is very important for a short-term view of liquidity. But entrepreneurs have very little room to manoeuvre when customer receivables have not yet come in or invoices have not yet been paid. That is why we also focus COMMITLY on the medium to long term. Here it is about seeing bottlenecks, but also room to manoeuvre, 3 to 9 months in advance.

2. Avoid false precision

But that immediately raises the question: how do I know what things will look like in 3, 9 or 12 months? We had an interesting conversation about this at Bits & Pretzels. This company plans that period using project forecasts and assumed probabilities of payments coming in. While the approach is of course entirely legitimate and works well for this company, we question the effort it takes. Historical figures, experience and estimates often arrive at a similar result in less time.

1. The courage to be wrong

And that leads to the most important point from our point of view. At the end of the day, planning is a look into the crystal ball. The VC Tomasz Tunguz once said that it is not about accuracy but about setting priorities, communicating goals and reaching milestones. We share that assessment. For us, planning is about setting goals and monitoring regularly whether they are being met. Mistakes are inevitable here. But you learn from mistakes and get better.

Credits: Photo by Frame Harirak on Unsplash