The Value of a Forecast

When thinking about cash flow forecasts, the most obvious benefit is it identifies potential cash shortages early enough to address them. However, even a good forecast isn’t going to be 100% accurate. A forecast is most valuable, not when it’s right, but when it’s wrong in ways you can explain.

A forecast is built on historical patterns (when money has typically come in, when it's gone out) applied to current activity. A good forecast is detailed enough that when those patterns don't repeat, you can see exactly why: a customer missed a payment, a project ran long and delayed invoicing. Over time, the patterns in what you got wrong become a roadmap for improving cash flow.