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5 min read

Cash Flow Forecasting in the Cloud: a welcomed panacea for crisis recovery planning?

Cash flow forecasting is now more crucial than ever for small to medium sized businesses traversing the current crisis. On the flip side and no less importantly, forward liquidity visibility is vital for opportunity preparedness, whether that opportunity comes in the form of a merger, acquisition or partnership, new product launch or meeting rising customer demand.

Having adequate tools and processes in place to enable intelligent cash flow forecasting doesn’t only prepare businesses for the ‘black swan’ moments we currently find ourselves in, it’s also an essential way to prepare for growth.

Nomentia recently spoke with Carri Nicholson, co-founder and mentor at Growth Circles and Founder & CEO at Can Do Business Solutions. Carri regularly organises business mastermind groups and one-to-one sessions with business and finance leaders across a variety of SME industry sectors here in the UK. We checked-in with Carri to talk about how SME’s are coping with their cash flow forecasting during the current crisis, who’s leading the charge when it comes to cash visibility and the pros and cons of getting it right.

Listen to the podcast HERE.

Cash flow forecasting – what’s different now to pre-crisis protocol?

  • During good economic conditions businesses look to the future and just crunch the numbers. COVID-19 has made cash flow forecasting an instant celebrity – everyone wants a piece of it and with more granularity and regularity than ever before.
  • The first month of the current crisis witnessed unprecedented business survival tactics; can I get paid, will I be able to pay, what’s going to happen over the forthcoming weeks, what does the future hold for my business?
  • The good news is, finances are now coming through; staff are on furlough or returning to work and businesses are benefiting from government funding. Initial economic fear is abating, albeit cautiously, and green shoots of recovery beginning to appear, supported with a warming confidence for the future. But a future that’s going to look a little different to what we’re used to.

Supply chain disruption has made accurate cash flow forecasting problematic - how can SMEs get it right?

  • Agility: the new and essential survival skill. Reducing and spreading risk is a good place to start. If your organisation has historically relied on one or few suppliers from overseas and/or one specific geographic location – spread that risk by expanding your supply chain options
  • Automate: know where your money is going and where it’s coming from. Traditional spreadsheeting is till endemic within small to medium sized businesses so it’s difficult to track and project cash flow accurately. Really understanding your cash position will also help identity and capture new opportunities - and they’re out there
  • Ask questions; business owners need to be asking lots of questions around paying conditions, bonus round viability, cost to the business of making the workplace COVID-compliant, plans to return staff to the traditional workplace environment or embrace remote working etc. Business and finance leaders need to be able to model and examine cash flow impact across all areas of the business for the immediate and medium-term future
  • Confidence: being able to depend on the numbers is of paramount importance. Daily cash flow forecasts have become the norm for many organisations but getting access to the correct data is sometimes difficult, resource intensive and a challenge to manage when staff are working remotely with manual systems and spreadsheeting forecast methods

Over 50% of businesses experience difficulties with cash flow forecasting, most of which still rely on manual spreadsheets - why are so many reluctant to take advantage of modern cloud-based technologies?

  • Get out of your comfort zone: many older generation business leaders and FD’s started their careers prior to computerisation. When spreadsheets arrived in the age of double entry ledgers, it was ‘manna from heaven’! As a result, spreadsheets have become entrenched in the psychology of some businesses, making it harder to move away from older traditional methods and invest in new technologies to promote a better way of working
  • Take a leap of faith: finance is notoriously risk adverse and, on occasion, find it difficult to adapt to new ways of working. But if you want to improve accuracy, enable the explosion in remote working and access your numbers at the frequency & accuracy required in today’s economic climate, modernising systems and processes is a no brainer
  • Don’t make assumptions: during the 1990’s many proverbial business fingers were burnt with costly tech investments which didn’t fulfil expectations. Some remnants of ‘project-fear’ still remain for some finance leaders who incorrectly assume upgrading or implementing modern technologies will be expensive, high risk, resource intensive and require IT involvement – enough to strike terror into the hardiest of finance folk!

Here’s the good news, modern cloud applications are quite the opposite; easy to implement, no data servers required, no up-front costs or IT involvement and affordable (some providers offering monthly pay-as-you go agreements). Add plug-and-play modules as and when required and et voila… run payroll, forecasting, model strategy etc at the press of a button

What are the key learnings finance leaders will take from the current crisis to ensure they’re better prepared for the future?

  • Automate: consider the benefit of increased automation to enable accurate, real time data access and scenario modelling. Also, think hard about the future implications if you choose not to modernise
  • Be Strategic: spend less time on manual processes and take a more strategic approach to opportunity & crisis preparedness. Incorporate ‘what if’ scenario modelling into your work mandate wherever possible
  • Build Relationships: encourage better communication between finance and business stakeholders. Get to know your wider business and all the elements and people who could be instrumental to driving growth
  • Vision: FDs’ who can buy into and understand the vision for their business will do the best out of this crisis
  • Remote working: it’s the future so prepare and develop staff with better investment in cloud technologies. Remember, better work: life balance and increased productivity go hand in hand
  • Invest: examine your cost base and identify where costs which can removed, reduced or re-directed to areas of the business which drive profitability and encourage growth, example: do you really need that 40-person work-space lease? Would my business & people benefit from better connectedness via cloud-based work systems? Would my customers welcome a product improvement?

The future looks bright, the future looks Cloud

In the midst of the these unprecedented times, businesses are traversing a difficult economic landscape but they’re also taking advantage of government funding, benefiting from low interest rates and exploring business growth opportunities. Business resilience is being tested to the maximum, but every cloud has a silver lining.

Listen to the full podcast with Anne-Marie Rice and Carri Nicholson (Founder & CEO at Can Do Business Solutions)

You can find the podcast HERE

Author: Anne-Marie Rice