In COMMITLY: "Plan beats open items".

The "either-or principle" in the short-term forecast Cash flow planning

COMMITLY is an innovative solution that works according to the "either-or principle" in the forecast works. In concrete terms, this means that if there is already a plan in a time period, the open items are used as the target. If there is no plan, the total of unpaid invoices is used as the forecast. Without this principle, differences would have to be planned in advance, which would be highly complex and confusing. Especially for the short-term Cash flow planning this would be very cumbersome and time-consuming.

• If a planned value is entered in a category in a month, the outstanding receivables serve as a guide to target achievement.
  For example: +100 is planned for April and we add +80 for open items -> the expected target achievement is therefore 80%.
  -> then ensure that the 80 are received (open item management) and invoice a further 20 (sales).
• If there is NO planned value in a category in a month, the total of the open items due in the forecast is assumed as the value.
  -> In the above example, the forecast would then show +80

Working with defined scenarios enables companies to identify the need for action at an early stage and adapt their strategies accordingly. Another key advantage of the "either-or principle" is the improved accuracy of forecasts - even for the short term Cash flow planning. By limiting oneself to the most likely scenarios and comparing these with current data and trends, realistic forecasts can be made. realistic forecasts can be created. This helps to ensure that the planning optimized and helps to allocate resources more effectively. Instead of considering a multitude of possible scenarios and risking an overload due to too many analyses, the "either-or principle" enables targeted control under the assumption of clear conditions.

Open items provide an early indication of the possible achievement of the short-term target Cash flow plan:

The short-term Cash flow planning is therefore not just a financial management tool, but a key component of corporate strategy. It enables us to react proactively and flexibly to changes in the business environment.

This is the perfect transition to the medium to long-term Cash flow planning.

Short-term Cash flow planning vs. long-term

In order to understand the financial control mechanisms of a company, it is important to distinguish between the short-term and long-term Cash flow planning to differentiate. Short-term Cash position planning focuses on the immediate future and includes open item management in order to identify bottlenecks at an early stage. Long-term planning covers a period of more than one year and guides the strategic direction of the company. It includes investment decisions, the procurement of equity or debt capital and the development of sustainable liabilities and receivables.

In this case, the open items serve less as a basis, but rather as an indication of future cash flow developments and the payment behavior of debtors and creditors. In the short-term Cash flow planning In contrast, the focus is on flexibility in dealing with uncertainties and unforeseeable events. In order to be able to react to spontaneous challenges, a dynamic Cash flow planning must be available for a foreseeable period of time and allow for adjustments.

In contrast to the short-term Cash flow planning method, the long-term method is more preventative in nature. It aims to prepare the company for the financial challenges of the future and to achieve strategic goals. Despite these differences, both types of planning should be taken into account. The information from the short-term Cash flow planning - in particular the analysis of open items - provides valuable insights for the long-term strategy. These provide information on how effectively the company manages short-term receivables, how this affects future financing and how the payment behavior of customers develops.