Tools for managing cash flow

Management of Cash Flow requires certain tools that ensure easily access and modification of data. Many Enterprise Resource Planning (ERP) applications and business accounting include such cash flow management tools amongst a range of other financial management applications. The main advantage of this integrated approach is, one can start his cash flow projection with convenience by using the actual financial results as specified by the accounting application.

When a person wants to update his cash flow projection periodically, the actual results from the previous projection can also be updated by his financial application. The disadvantage is that one is limited to the attributes of the cash flow tool embedded in the application. This means, that if the person chooses to prepare cash flow projections weekly rather than monthly, as offered by the tool, he cannot.

Moreover, the tool may not be as flexible in calculations in some situations. Instead of preparing one cash flow projection, some firms with volatile financial outcomes prepare several cash flows: worst case and best case scenarios along with the most probable outcome. Such a range of possible outcomes help highlight the rewards and risks of implementing certain financial strategies. Theses multiple scenarios may not offer built-in tools.

Standalone Tools

Selecting a standalone tool allows a person to choose one which delivers all the functions required by the business. If the cash flow projection is based on a 10-day period with three different dimensions to each period, one can find a tool to accomplish it. The spreadsheet delivers both flexibility and calculating power which is well-suited for making cash flow projections. It even lets an individual to consolidate the cash flow results resulting from different dimensions that use various accounting principles.

Unless the operator is an experienced spreadsheet jockey, there can be a daunting risk in developing a cash flow management spreadsheet right from scratch. However, he may get assistance in the form of prepared templates that can be purchased to do all the calculations. The accountant is to decide if they satisfy the requirements of the business. Spreadsheets can be modified easily so the individual can start with a purchased template and then modify it to meet the business requirements more closely.

Perhaps the main drawback of implementing a standalone cash flow tool is problem of regular updating, how an individual is supposed to get his actual financial results updated into the tools when he prepares his next periodic projection. He may need to experiment with export and import settings in his accounting application and his cash flow tool to establish the easiest method. Contrarily, if the cash flow projection is not too in-depth, it may not consume much time in simplifying type in the new numbers.

Example: Miscrosoft Excel

Based on a study conducted by AllBusiness.com, Microsoft Excel spread sheet was established the second-most popular tool for cash flow management. Excel is an element of the Microsoft Office suite, because of which it is already installed on most computer systems, adding to its popularity. Many ERP and accounting applications support extraction of financial data to an Excel spreadsheet, easing modification pains. However, the general ledger accounting structure may not be similar to one’s preferred cash flow projection report. In such a case, he needs to look for attributed that map accounts to his reports.

Microsoft Office Small Business Accounting delivers some of the tightest connection with Excel, as perhaps expected.