Cash Flow is King: How to Build Accurate and Dynamic Financial Models
Carl Seidman, CSP, CPA
Helping finance professionals master data, FP&A and CFO advisory services through learning experiences, masterminds, training + community | Adjunct Professor in Data Analytics | Course Creator | Advisor | Microsoft MVP
If cash is king, cash flow forecasting must be the king of all financial models. Here are some important practices you can implement into yours.
For the roll-up of unclean data into a clean, aggregated format, I usually use one of two approaches if using Excel.
1?? Approach 1: Account Mapping
If I have a bunch of revenue accounts in the GL, I want them to aggregate into the TWCF in only a few lines. I use SUMIFS to pull in the correct data based upon a flexible range of GL account numbers.
2?? Approach 2: Power Query
A huge complaint financial modelers have is messy data that takes a long time to update. If you have messy raw data, or data from multiple operating units, use Power Query.
Power Query lets you sanitize the data even before it gets into the model. Once it's imported, you can keep it in a dynamic table in a single worksheet. Then use SUMIFS or other lookup functions to easily bring it into the TWCF.
?? How to Trigger Actuals to Come in
In the third line of the model, you see actual/forecast. This isn't merely a description. It's a toggle.
When I want to bring actuals into the forecast and roll it forward, I can control the model at the top of each header. I don't need to hardcode numbers in.
After I bring in a week of actuals, I can then add a 14th week to roll it.
?? One Point for Extreme Care
Payment and collection events can get lost when rolling from one week to the next. If a collection was expected but didn't happen, rolling the dates and not the values may sweep that collection into the past. The cash balance won't reflect it.
Variances should show not just what happened in prior weeks but also whether forecast figures are timing issues or permanent misses. I will sometimes create a 100% formulaic sheet that shows all variances from last week's forecast to next week's forecast.
This way, big differences pop and I can easily monitor all anticipated variances to the forecast and not just historical variances.
Questions or feedback? Simply message me.
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Excel for Financial Planning & Analysis
Maximize Microsoft Excel for financial planning and analysis (FP&A). Learn to leverage advanced Excel tools such as dynamic data tables, ranges, and arrays for effective forecasting, planning, and modeling, while addressing key limitations and strategies for improved data organization and analysis.
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??30 Minute Lightning Lesson??
What you'll learn:
??Build dynamic, rolling forecasts
Good financial modeling means being able to update data and assumptions without overhauling the model. You'll learn how.
??The most recent Excel modeling functionality
Great functionality doesn't need to be complicated. You'll get ideas of what basic and advanced functions to use.
??Quickly and easily change assumptions
Activity drivers should be documented, vouched, and easy to update. You'll see how this works.
How can I help you?
Effective cash flow forecasting is a game-changer for financial stability and decision-making. By leveraging tools like dynamic ranges, Power Query, and variance analysis, you can turn messy data into clear, actionable insights. With these strategies in place, you’ll not only improve accuracy but also gain the confidence to navigate even the most complex financial challenges. Your cash flow is the foundation of success—make it work smarter for you! For more FP&A insights, follow me on LinkedIn.
Until next time,
Carl
Fractional CFO ???? I help SMBs lead with Financial Clarity & Confidence | Founder & CEO @freshfpa | FP&A, Finance & CFO Thought Leader | Finance Influencer | Former Amateur Boxer ??
2 小时前Carl Seidman, CSP, CPA profits are a dream but cash is a reality. If there are two metrics to know the strategies, tactics, milestones and execution around its cash burn & cash runway those metrics are vital. Also, know them from an accounting, FP&A and CFO perspective and you will bring value to any conversation with business partners outside of finance. Keep sharing our expertise and knowledge Carl! Happy Thanksgiving brother!
Finance Director || CFO India || Business Partner || Finance & Strategy || ACA || ACS || CIFRS || CIND AS || CFM
11 小时前great post !!, one suggestion if the cash flow covered the immunity of DSCR and ISCR and Debt equity restricted to 1.2x via the model itself. It would ensure a healthy cash flow. The shortfall can be shown as the gap between is ideal healthy cash flow and the current status of the entity, helping the board to take a pragmatic call and maintain healthy cash flows.
Champion of Finance AI -Controllers, FP&A, Tax , Treasury
11 小时前Great post! I completely agree that cash flow forecasting is crucial for any FP&A professional. One additional tip I would add is to incorporate scenario planning into your forecasting process. Keep up the great content!
I help firms find the right finance expert remotely within 24 hours: focus on investment talents, VC, PE, FP&A, Controllers, Financial and Data Analysts
13 小时前Carl Seidman, CSP, CPA Spot on, Carl! Cash flow forecasting is indeed the crown jewel of financial models, especially in uncertain times. We've seen remote FP&A professionals excel by leveraging tools like Power BI and scenario modeling to refine forecasts and provide actionable insights. What’s your top tip for balancing forecast accuracy with the need for agility in fast-changing environments?
Strategy & Corp. Finance Executive | Helping impact-driven businesses scale up | Fractional CFO to startups and SMBs. Certified Scaling Up Coach.
13 小时前Does finance data disarray obscure cash visibility for you?