4 Cash Flow Dashboard Alternatives to Consider

Introduction

A Cash Flow Dashboard is an instrument used to monitor the performance of an organization’s financial performance, including cash flow projections, cash flow statements, and cash flow analysis. This type of dashboard allows for easy interaction with current and potential investors, as well as providing stakeholders with a live view of the organization’s financial health.

The following is an overview of four of the top Cash Flow Dashboard alternatives to consider for your organizational monitoring needs.

Cash Flow Scorecards

A Cash Flow Scorecard is an effective tool to help businesses identify areas where their finances need to be improved or should be developing better results. By keeping track of the cash flow outcomes for different activities, companies can adjust their practices or plans to optimize their cash flow.

Definition of a Cash Flow Scorecard

A Cash Flow Scorecard is a tool that allows businesses to track their financial performance over time. They provide an overall financial picture of the health of the company, helping to identify areas of improvement to maximize returns and minimize losses. A Cash Flow Scorecard uses a variety of metrics to measure performance and analyze cash flows. This includes tracking revenue and expenses, tracking accounts receivable, inventory, and accounts payable, and reporting on profit and loss statements.

Benefits and Limitations of Cash Flow Scorecards

• A Cash Flow Scorecard helps businesses understand their current financial situation and identify problems that need to be addressed.
• It helps them to make well-informed decisions about their strategies and strategies, so they can optimize their cash flow.
• It also identifies areas of overspending, helping businesses to make adjustments in order to reduce costs.
• However, it does depend on accurate reporting, and if the data is inaccurate, then Cash Flow Scorecards cannot be relied upon.

Example of a Cash Flow Scorecard

An example of a Cash Flow Scorecard might include metrics such as total revenue, total expenses, accounts receivable, accounts payable, and inventory. Additionally, it could include metrics such as average revenue per sale, total profit margin, and average profit margin. Each metric is tracked over a specific period of time to calculate the overall financial performance of the company. This allows the business to make well-informed decisions about their practices in order to improve their cash flow.

3. Cash Flow Financing

Cash flow financing is a type of financing that uses cash flow performance and projected trends as a basis for decisions. Rather than use the potential of a project or the value of the collateral pledged as collateral, cash flow financing is more focused on the existing and future financial performance of the borrower.

a. Definition of Cash Flow Financing

In its simplest form, cash flow financing is based on the likely ability of a borrower to service their loan repayments as and when they fall due. It is a type of financing that uses cash flow performance and projected trends as a basis for decisions. It is a form of unsecured financing that is often used for startups, in businesses that are seasonally dependent, and generally for any company or project with a high level of uncertainty or risk.

b. Benefits and Limitations of Cash Flow Financing

Cash flow financing has some distinct advantages for businesses seeking financing. Firstly, it is available as a form of unsecured financing. This makes it an attractive option for businesses without access to significant levels of collateral. Secondly, the cash flow component means that businesses can qualify based on current performance rather than potential. Finally, cash flow financing can be tailored to accommodate seasonally variable businesses, such as those in the retail sector.

However, the same benefits that make cash flow financing an attractive option also come with their own limitations. Firstly, due to the unsecured nature of the financing, interest rates are usually higher than for secured financing, meaning that it can be more expensive in the long run. Secondly, most lenders will require detailed financial statements and projections, meaning the application process can be more time consuming. Finally, lenders may require more onerous repayment terms and conditions, with some insisting on more frequent than monthly payments.

c. Example of Cash Flow Financing

A good example of cash flow financing is a short-term loan. This is a loan that is intended to fund short-term projects or bridge cash flow gaps that may arise. A business can take out a short-term loan and use it to cover expenses while they are waiting for their next round of invoices to be paid. This means that they don’t have to use their own cash reserves or dip into their overdraft facility to fund the project.

4. Cash Flow Forecasting

Making an educated prediction of how much money a business will receive as well as how it will spend in the near future is cash flow forecasting. Cash flow forecasting involves a large amount of data, including customer purchase data, market forecasts, and economic information. By having an estimate of its future cash flow, a business can make the necessary decisions to mitigate risks and make investments.

a. Benefits and Limitations of Cash Flow Forecasting

Cash flow forecasting can help a business in making data-driven decisions about their finances. Through cash flow forecasting, businesses can plan for long-term projects, determine what investments to make, and manage costs better. Cash flow forecasting can also help identify cash flow patterns and can plan for potential changes in the future.

The process of creating cash flow forecasts can be time-consuming and complex. This makes it difficult for businesses to keep up with the necessary data and information. Additionally, cash flow forecasting is subject to errors and uncertainties, including discrepancies in vendor invoices, customer payments, and data accuracy. As a result, businesses need to continuously monitor their financial data to accurately predict cash flow.

b. Example of Cash Flow Forecasting

Cash flow forecasting can be used to develop effective strategies for managing cash flow. For example, let’s say that a business has identified that their inventory turnover rate is decreasing, resulting in an increase in inventory levels. Through cash flow forecasting, the business can determine what adjustments are necessary to reduce the inventory levels, which can result in improved cash flow. Additionally, cash flow forecasting can be used to accurately predict the timing of customer payments and plan for expected increase or decrease in sales.

Cash Flow Budgeting

Cash flow budgeting refers to developing a detailed plan on how a business will manage its capital. It is a process that includes forecasting, planning and monitoring the cash inflows and outflows. The goal of a cash flow budget is to make sure that the company has enough money to meet the projected liabilities and capital expenditures.

Benefits and Limitations of Cash Flow Budgeting

Cash flow budgeting has many advantages. It gives a company the ability to check on its financial health and ensure that it is able to finance its day-to-day operations. Additionally, it can also help companies plan for upcoming expenses, such as payroll or inventory purchases. Lastly, it can help identify any cash flow imbalances and areas of risk.

On the other hand, there are some drawbacks with cash flow budgeting. One of the biggest drawbacks is that it requires a significant amount of time and effort to create a budget. Additionally, the forecasts can be inaccurate due to a variety in factors, such as changing market conditions. Lastly, it can be difficult to track and monitor actual cash flows versus budgeted ones.

Example of Cash Flow Budgeting

Let's take a look at an example of how a company may use cash flow budgeting. ABC Company has a goal of increasing their profits over the next three months. To achieve this, they first create an estimate of their expected income and expenses over the quarter. They then use the details of the budget, such as projected inventory purchases and salary costs, to calculate the amount of money they need to have on hand at any given point.

ABC Company then closely monitors the actual cash flows against this budget. Any deviations can be quickly identified and actions can be taken to ensure that the company meets its goals. At the end of the quarter, the budget can be compared to the actual cash flows to review the performance and identify any areas of improvement.

6. Cash Flow Analysis

Cash flow analysis is an important tool for businesses and financial institutions. It is a type of financial analysis used to determine the financial health of an organization or organization’s projects by measuring and analyzing the flow of cash. Cash flows are categorized into operating, investing, and financing activities. They help evaluate the liquidity, profitability, and solvency of a business.

a. Definition of Cash Flow Analysis

Cash flow analysis is a process for measuring and analyzing the movement of money into and out of an organization. It takes into account the types of activities that generate or use cash, and their timing. It helps businesses evaluate their liquidity, and the ability to pay their bills and commitments on time.

b. Benefits and Limitations of Cash Flow Analysis

Cash flow analysis offers a number of benefits to businesses. It helps them develop strategies to improve cash flow, and gives them visibility into the state of their finances. It can help identify and address discrepancies in cash balance and expenses, as well as uncover problems related to the collection and payment of invoices. It also helps to inform decisions around investments, budgets, and financial planning.

Cash flow analysis has a few limitations. It can be difficult to accurately forecast cash flows and this can lead to inaccurate results. Additionally, it is only able to measure the movement of cash, not other forms of payment, such as stocks, property, or services.

c. Example of Cash Flow Analysis

An example of cash flow analysis is a business that sells products and services

• Operating Activities: Collection of customer payments, payment of suppliers/inventory/employees, etc.
• Investing Activities: This includes the purchase or sale of investments or property.
• Financing Activities: This includes the repayment of debt, and the issuance of new debt or equity.

By analyzing the cash flows, a business can better understand its liquidity, profitability, and solvency, and make more informed decisions about investments, budgets, and financial planning.

Conclusion

Though cash flow dashboards provide a holistic view of the financial position of an enterprise or department, there are several alternatives for businesses to consider when trying to find the most suitable cash flow method for their needs. This article outlined four great alternatives: software programs, online courses, traditional file systems and CFO/consultants.

Summary of Alternatives

Software programs make it easy to monitor financial performance and help to ensure accuracy. Online courses provide a step-by-step approach to creating cash flow dashboards with an emphasis on developing the skillset needed to manage your finances. Traditional file systems can be used to track financial data over time, providing time-stamped records for tax and audit purposes. Lastly, CFO/consultants provide dedicated, long-term support structures tailored to a company's specific needs.

Importance of Cash Flow Dashboards

Cash flow dashboards help businesses to make timely, informed decisions that ensure their success in the long term. They provide an up-to-date snapshot of the organization’s financial performance, and enable financial managers to adjust their strategy to ensure the optimal distribution of resources. Cash flow dashboards are essential tools for prudent financial management and consequently should not be overlooked in a businesses’ toolkit.