Mastering Transaction Chaos
Reporting monthly profit and loss is important, but very few business transactions actually occur in a neat monthly fashion. They can occur on a weekly or quarterly basis, in periodic clumps or as one-offs, to identify but a few possibilities. The value of a transaction may be subject to change upon contract re-negotiation or due to inflation. These are just some of the important factors that shape cash flow. An accurate cash flow forecast maps transactions exactly as they occur in reality.
Cash balance itself is a dynamic beast. It is good to know what happened in the preceding month, but it is crucial to anticipate what is going to happen tomorrow, next week, 6 months or 3 years down the track as well, so you can plan for shortfalls or take advantage of surpluses.