Read this article and learn how to create a liquidity forecast with re:cap.

What is it?

With the liquidity forecast you can proactively plan your liquidity.

1. Set your assumptions: choose default settings to customize your forecast, including options for monthly revenue growth, cost growth, financing & investing cash flow, or intracompany cash flow. We’ll integrate your historical bank data to generate a tailored forecast.
2. Choose your time horizon: select a 6, 12, or 24-month view to align with your short-, mid-, or long-term financial planning.
3. Adjust as needed: fine-tune individual values or update entire columns with a single click. Remember, the forecast is a dynamic tool — use it as a guide rather than an exact prediction.

What does it tell me about my company?

A liquidity forecast offers a detailed view of your company’s cash position over a set period, helping you assess its capacity to meet financial obligations as they arise. It’s essential for managing cash flow and maintaining solvency, ensuring smooth operations without unforeseen liquidity issues. Here’s what a liquidity forecast reveals about your business:

1. Cash flow outlook: a liquidity forecast projects future cash inflows and outflows, giving you a better picture of whether your business will have enough cash to cover ongoing expenses such as payroll, rent, supplier payments, and loan obligations.
2. Financial health and stability: a well-constructed liquidity forecast offers an accurate reflection of your company’s financial health. Positive cash flow projections suggest the business is generating enough revenue to cover its expenses and investments.
3. Risk identification: forecasting liquidity allows you to identify potential risks before they escalate. If there are forecasted periods where cash dips below a certain threshold, this could indicate a risk of running out of cash.
4. Funding requirements: the liquidity forecast helps pinpoint when your company may require additional funding. By highlighting periods where cash inflows fall short of outflows, it allows you to plan ahead and explore funding options to maintain healthy cash flow.
5. Cash surpluses and investment opportunities: a liquidity forecast can also signal periods of excess cash, providing an opportunity to make strategic decisions. Surplus liquidity may be reinvested into the business, used to pay down debt, or distributed as dividends
6. Operational decision-making: understanding your liquidity position informs better operational decision-making. For example, if a significant expense, like equipment purchase or expansion cost, is on the horizon, you can plan ahead. If cash flow is tight, you can prioritize critical expenses or delay non-essential investments, helping to maintain smooth operations.
7. Strategic financial planning: a liquidity forecast is crucial not only for immediate cash flow management but also for long-term financial planning. By understanding future liquidity needs, you can align financial strategies with growth objectives.
8. Cost management: regularly reviewing your forecast enables you to identify areas where cash outflows may exceed expectations due to unforeseen costs or inefficiencies.

What are the underlying data sources?

The liquidity forecast is based on your historical cash transactions. You can adjust it with own assumptions.