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COVID-19: Nine cashflow analysing and forecasting principles

17 April 2020: ICAEW has created a guide setting out the fundamental principles of effective cashflow analysis and forecasting to help finance professionals through these uncertain times.

The economic impact of coronavirus means effective cashflow analysis and forecasting have never been more important to businesses. As the trusted adviser of many businesses, in moments of crisis such as these accountants are looked to as guides through the uncertainty.

Therefore, it’s essential they have an approach to cashflow analysis and forecasting that’s up to the job. To help with this, ICAEW Business and Management Faculty has created a guide: ‘COVID-19: Nine principles for finance professionals - adapting cashflow processes, analysis and forecasting’ which sets out principles for effective cashflow analysis and forecasting.

To read the full guide click here, but below are the nine principles as laid out in the guidance. 

The nine principles

  1. CEOs should take overall responsibility for cash management if there is a risk of business failure.
  2. Ensure responsibilities, reporting lines and staff cover for all cash-related matters are clearly understood throughout the organisation.
  3. Set up regular cash meetings involving those with insight on predicted cash movements.
  4. Build up forecasting effectiveness by combining business experience with the best available evidence and improving forecasting processes. Human biases need to be managed.  
  5. Design cashflow reports to support critical business decisions and funding applications. Therefore, they should be understandable by non-accountants. 
  6. Maintain controls over cashflow reporting.
  7. Increase frequency of reporting and consider whether to report on monthly, weekly or daily cash movements.
  8. Maintain underlying data in as much detail as possible – this enables maximum flexibility in reporting.
  9. Follow ICAEW’s Twenty Spreadsheet Principles when developing cashflow reports and forecasts.

Note: for information on how to get cash flowing into your business or how to access government support for coronavirus business disruption see our guides COVID-19: Six actions for finance professionals on cashflow and The financial management implications of coronavirus.