Learning from old lessons - the importance of cash forecasting

It's just like the old days!

Current economic headwinds take me back to my early career when an early lesson was the importance of cash forecasting that dealt with contingencies such as rising inflation and interest rates and forex gyrations.

Talking to our clients and the banks, many businesses are seeing a spike in working capital as supply chains shorten and contingent stock buying results in overstocking. At the same customers are wanting more credit to offset rising debt costs.

During these times, understanding your cash position is critically important. Lenders will not be sympathetic to a call out of the blue and at the last-minute requesting additional working capital facilities. This is particularly the case if you have no relationship with the bank, as is often the case where you aren’t currently a borrower.

Now, more than ever, having a cash forecasting tool is essential. If those forecasts show an actual or even potential need for extra facilities, you must approach your funder early with a proposal which is well thought through and contains financial data that supports that plan. If you are in the process of renewing facilities, make sure you secure facilities that err on the side of caution. The banks will want to support well-run businesses which are well-managed and on top of the detail.

We are constantly in dialogue with lenders, so if you want to discuss your situation, please do not hesitate to contact nigel.barratt@hurst.co.uk.

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