The paper "Cash Flow Projections, Contingency Plans" is a perfect example of a finance and accounting coursework. Cash flow projection is an element of cash flow management. Cash flow projection is essentially forecasting the amount of money the company expects to get or spend in future (future cash inflow and outflow). In other words, it is the projected amounts of receipts and payments including all projected income and expenses. Projections can be long-term i. e. covering a period of twelve months, or short-term, i.e. covering a week or a few weeks or days.
The importance of cash flow forecasting is wide. It can help the business forecast on future surpluses or cash shortages and thus be able to make reliable decisions. This can include preparing for tax payments as well as for settling of other bills, purchasing of new equipment, putting aside cash that can be used for business expansion and establishing good relations with banks and ensuring that the business does not default the payment of any bank loans. The business will also be able to brace itself for tough times in case such a situation comes by.
Scenarios can be considered during the forecasting process and give room for adjustment in case the business is hit by some sort of financial turmoil. Measures can thus be taken to insulate the business from the serious effects of cash shortfalls. Financial Managers played a critical role in financial forecasting. They provide financial advice and support to colleagues as well as clients during the process of coming up with cash flow projections. Since the business environment varies considerably, it is upon the financial manager of any business to give the guidance necessary to the analyst who has been given the responsibility of coming up with the cash flow projections.
Since the cash flow projections involve a substantial amount of funds, the financial manager’ s involvement in this process is invaluable. Cash flow projection has financial implications on how the activities of a company will be conducted in future to ensure the company remains on the profit making track. This is essential for the achievement of both short-term and long-term goals. To ensure the validity and accuracy of these projections, the financial manager was consulted to provide and interpret the already available financial information.
These include but not limited to historical statements on cash inflows and outflows, previous statements of financial positions, profit and loss accounts. The information thus obtained from these documents were used on coming up with the future cash flow projections. This plan was also prepared from other documents obtained from the office of the financial manager pertaining to the various factors influencing business performance. These include competitors and government policies that may have direct or indirect effects on the cash flows within the organization.
The financial manager gave the laid down mechanisms of monitoring and minimizing financial risk. Other than these, the financial manager, being in direct communication with auditors and also the custodian of auditing results, provide valuable information that is very helpful for the accuracy of the forecasted cash flows. This is because it is the efficiency and accuracy in the performance of available equipment and production mechanisms that will lead to the preparation of reliable cash flow projections. The information on market trend also obtained from the office of the financial manager was used in preparing this plan.
This includes the change in consumer taste and performance of company brand. The financial manager is the officer of the company responsible for developing the contact relationship with appropriate external parties like solicitors, bankers and statutory organizations. It is these parties that shape the financial status of the company and good relations with them will ensure the stability of future cash flows. The manager is also in charge of supervision of all the other staff in the company and this makes him the custodian of the financial information obtained from other departments including all sorts of expenditure and payments made through such departments.
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