Flexible Cash Flow Assumptions in Your Forecast: New Feature

3 min. read

Updated November 24, 2024

Whether you’re launching a new venture or managing an ongoing business, it’s important to have a good understanding of your cash position: monthly cash flow as well as future cash needs. A revenue and expense forecast, combined with assumptions about cash timing, is the best way to plan and manage cash flow.

New LivePlan Feature

And with LivePlan’s latest update, you can now make specific revenue and expense line item adjustments to your cash flow assumptions, allowing for more flexible and accurate forecasting around your future cash balance.

Forecasting if your business hasn’t launched yet

If you’re just beginning to consider a new business idea, you don’t want to overthink it. For example, spending time researching each of your potential vendors’ terms and figuring out when exactly you might pay them is probably a waste of time. Simple forecasts are generally better forecasts.

Instead, once you’ve settled on your business model for your startup or small business, just map out your main categories of revenue and expenses in your forecast. Then, estimate the percentage of customers that will be “on credit” and the typical payment terms you’ll use.

Note: Not sure what we mean by business model? A business model is a description of how your business makes money. It’s an explanation of how you deliver value to your customers at an appropriate cost. Read more about business models here.

LivePlan makes this super easy, by the way, walking you through building your forecast step-by-step. From there, you should have a good sense of what you need to launch your business.

Forecasting for an up-and-running business

But let’s say you have a business that is already up and running. You have valuable historical data about how long customers in each revenue stream tend to take to pay you (accounts receivable), and when vendors in each expense category expect to get paid by (accounts payable).

In this case, LivePlan’s new option to adjust cash flow assumptions for individual forecast revenue streams and regular expenses is perfect for you, allowing you to easily create a more accurate projection of your future cash flow.

Smart forecasting supports more complex business models

Companies with more complex business models will also benefit from these additional options for modeling cash flow in LivePlan.

For example, if you’re selling both B2B (selling to other businesses), as well as directly to consumers (B2C), you will likely collect cash faster from your B2C customers than your B2B customers. You’re probably going to be invoicing at least some of those B2B customers and waiting for them to pay you, rather than collecting cash right on the spot.

In LivePlan you can create different revenue line items for these different types of sales. Then you can apply the specific percentage of sales on credit and days to get paid for each. With this more granular forecasting method, you can get a more consistent and accurate look at your cash flow.

When your forecast is based on the underlying cash assumptions of your business model it is more accurate. In this way, your cash forecast will help you make critical spending decisions: catching potential cash shortages before you’re faced with a problem or allowing you to plan for needed capital purchases or other large expenses.

Test ideas and feel confident about your cash flow

Finally, this new feature will provide you with more flexibility to better test different scenarios that could affect your cash flow. Use LivePlan’s “what-if financial forecast scenarios” to copy your strategic forecast and test what your cash position would look like if you made select changes to your payables or receivables.

How much more cash could you have available if you offered your B2B customers a discount for paying invoices promptly?

Or what if you were able to negotiate a longer payment period with the suppliers you’ve included in the same expense line item? Flexible cash assumptions in LivePlan allow you to test scenarios like this for strategic decision making.

We hope that these new options will help you feel more confident about your cash flow, giving you the information you need to make better, data-driven business decisions. Check out LivePlan to learn more about building budgets and forecasts, tracking your goals, and creating easy-to-digest visual reports.

And for current LivePlan users, as always, please reach out to our team of customer advocates and let us know how this new feature is working for you.