Whether they run small or large-scale businesses, business owners are always searching for the perfect cash manager or cash management tool for the sheer task of managing cash flow. It’s an indispensable tool for every lucrative business. Even if one forecasted cash flow isn’t enough, it never hurts to go for additional ones. There are many possible upsides for your company, and while you can model them all, your best bet is to be cautious and optimistic in equal measure.
Preparing various cash flow scenarios can help you ponder your options and be better prepared. Therefore, you will be better prepared when acting under extra pressure, and as a result, you will arrive at a quicker decision.
How Cash Flow Scenarios Help Mitigate and Control a Crisis
Scenario planning means making multiple emergency cash flow scenarios when a crisis is imminent. It can help you plan by helping you understand the variables that affect your cash and think of reasonable potential future circumstances. Scenario planning is part of managing cash and funding possible upcoming scenarios.
Moolamore’s scenario builders can help you visualise changes and opportunities as you add, split, delete and recast transactions. For example, if you want to see the effect of adding a new transaction to your budget, Moolamore can display how much money is left in your current budget and how much you would have if you said the new marketing. Moolamore also lets you split a transaction into multiple parts so that you can see the effect of each change separately. This is useful if you want to determine which part of your budget could improve.
When we are in a crisis, we are more likely to make rash decisions and miss out on opportunities. However, there are ways to overcome this obstacle and ensure that our decisions during a crisis are based on sound reasoning. One way is through using Moolamore’s scenario builders to visualise the possible happenings we need to be aware of and reflect on later and improve our decision-making process. By taking this measure, we can ensure that our actions during a crisis are based on sound judgement rather than emotion.
Pre-empting cash reserves is a critical component of effective cash flow management. A scenario builder can help you identify potential problems and proactively address them. By building plausible scenarios, you can better understand your current financial position and make informed decisions about managing your resources best.
How Many Cash Flow Scenarios Do You Need?
You should have at least three possible scenarios prepared in advance- the best-case scenario, the worst-case scenario and the most likely scenario.
This is an excellent place to begin for fundamental scenario analysis, but don’t go dependent upon it. Instead, consider more avenues of action and work through the ones that are most likely to be effective. A significant amount of things become unknown as time passes. The primary factors are the ones beyond you’s control. It will not be likely that you can forecast all of them, but you can expect the more likely ones.
Crisis survivors have more experience, allowing them to make better-informed decisions if the crisis occurs again.
Faced with economic downturns caused by global events, such as the spreading of the novel coronavirus, COVID-19, we are likely to be presented with a new, unforeseen economic climate. These are the times when, besides more unknowns, we also have a decreased degree of control over them. We don’t know what’s in store, which will also affect us; we don’t know how long the downturn will last. But even if we don’t have direct experience, we can acquire this skill from history, from other people’s affairs.
How Do You Create Cash Flow Scenarios with Moolamore?
Moolamore is a cash flow management tool that allows users to create different cash flow scenarios and see how each would affect their finances. By building different budgets and seeing how each would play out, users can better manage their money and stay on track with their financial goals.
When Should You Prepare Cash Flow Scenarios?
The primary advice is that you can never know precisely what danger is around the corner. However, better planners always look ahead to potential threats and opportunities. Pleased when things are going well, we know that preparing for the worst is integral to any emergency planning. Cash flow scenarios are critical in times of crisis.
When Should You Review Your Scenarios?
Ordinarily, you would only require to update scenarios a few times each year. But if you have a fast-moving crisis, you may need to edit them more often. As more information becomes available, look at how it affects your scenarios. Your scenarios need to be reviewed habitually as different options become available. Undisclosed options that you were considering may no longer be attainable due to external influences.
Cash flow is a crucial part of any business, and it can be challenging to manage when things start to go wrong. However, by being prepared by visualising different financial scenarios, companies can minimise the chances of encountering cash flow problems. This not only helps to keep operations running smoothly but also allows for more accurate planning and budgeting.
In conclusion, scenario builders are valuable insights into how a business might operate. Therefore, you should review them as frequently as possible to ensure their accuracy. Moolamore is your business’s new best friend! It is intelligent, fully automated and intuitive. Request a demo now!