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What is a 13 Week Cash Flow Forecast? | Payference

The 13-week cash forecast is the most popular breakdown as it achieves a balance between accuracy and range. The rolling 13-week cash flow model is a great way to drive decisions on the operational and strategic front. By driving decisions around the source and use of funds, companies can draw key levels to optimize working capital

Companies may focus on accelerating collections, negotiating the terms with suppliers, managing credit lines, seeking additional funding, or managing excess cash. Sectioning the year into quarters, this cash forecast is applicable in numerous strategies corporate senior management designs for decision-making. 

The quarter-end date, a common reporting period, is always covered by this forecast. If a company finds itself in an unfavorable position, it can look to its 13-week forecast to determine how and when possible liquidity deficits should affect it. This allows the company to at least prepare prior to the complication and hopefully redress its factors. 

External requirements such as bank reporting and lending requests regularly require 13-week cash forecasts, which are used to evaluate the company’s overall risk level and ability to pay its debts. A similar process occurs with investors and owners who want to know the general financial health of the company. This time horizon is not sufficient for every specification but can be greatly advantageous if adopted and utilized properly. Many management teams have weighed the benefits and disadvantages of different cash forecasting time horizons, finally deciding the 13-week cash flow forecast option is best suited for their company. 

You can do the same by following the steps below. 

  1. The first step when establishing a new cash flow forecasting system is to determine all the stakeholders and their requirements beforehand to make sure the system is appropriate for its fundamental purpose. The list of stakeholders should include the contributors and users of the forecast in addition to senior management who depend on the reports that forecasts supply data. Their requirements should involve what they need to see, how regularly they need to see it, and what they apply it to. 
  2. The second step is to design your 13 week cash flow model. Forecasting is many times said to be a mix of art and science. Implementing an integrated 13-week cash flow can become complicated if not designed properly. There are different nuances pertaining to the business. Summaries and outputs of 13 weeks' cash forecasts clearly identify cash receipts, cash disbursements, and ending cash balance. 
  3. The third step is to manage the process properly. In any forecasting process, there is an array of individual data sources that contribute to the forecast. There exists the objective to automate data inputs when possible and functional. One of the most time-consuming parts of modeling the 13-week cash flow is identifying, aggregating, and mapping the data from different sources. When full automation is not feasible, action should be taken to streamline the data gathering method. This is especially significant for a 13-week cash forecast as the data needs to be refreshed on a weekly/daily basis. Products such as Payference can guide your company through this step and further. 

The core of a good process is clarity on who is responsible for certain data and by when they must provide it. A clearly defined system reduces the risk of errors when carrying out a task and helps the submission of data in a timely manner. It is essential for an individual to take responsibility for the accuracy and quality of the data so they can implement revisions to the process as needed. The good 13 weeks cash flow forecast is built on getting the data and assumptions right. 

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