Chapter 3 : What quality should the result of cash flow planning have?

For all its pragmatism, a cash flow plan still has to meet certain minimum criteria. Cash flow planning as part of reporting, and how it differs from accounting.

Good cash flow planning must not only be pragmatic, it also has to meet minimum criteria in order to be useful. In times of crisis in particular, the information should have two essential characteristics: verifiability and timeliness.

The quality of the results: what makes good cash flow planning?

Like every decision in finance, the information in a cash flow plan has to be reliable and up to date. That means:

  • Verifiability: the information must be traceable and consistent so that it offers readers a clear basis for decisions.
  • Timeliness: the data should be as current as possible – ideally accurate to the day – so that it can genuinely contribute to running the company.

Verifiability: why reliability counts

How do you make sure the data in your cash flow plan is consistent? By providing comparable and consistent data that is free of contradictions. Contradictions can appear either within the data supplied or in comparison with past data. Typical questions that can help:

  1. Does the current report fit the previous ones?
  2. Were figures presented differently in the past?
  3. Where do any changes come from, and are they plausible?

By asking these questions you can make sure that your cash flow planning is solid and leaves no ambiguity.

Timely: why current data is decisive

Time plays a decisive role in cash flow planning. What good is the best information if it arrives too late? Everyone knows the situation: waiting for reports from the tax adviser – sometimes weeks old by the time they finally arrive. But how is planning supposed to work if those figures are already out of date? Spoiler: it does not.

So where does this current and timely data come from? The answer is simple: straight from the bank account. Smart cash flow planning starts exactly here and feeds real-time data directly into the process.

And where does this information not come from? From classic accounting. That is important, no question – but for day-to-day cash flow planning it is simply too slow.

Time is money, especially where your liquidity is concerned. Use current data, take decisions faster and always stay one step ahead for your company.

In summary: what makes good cash flow planning

Here is an overview of the qualities of ideal cash flow planning, to give you some orientation. Our blog post Theory: reporting in the company covers this in even more detail.