13 Week Cash Flow Modelling
Ripping off the Furlough plaster. Why every business needs control of their cashflow.
What is 13 Week Cash Flow (13CF)?
As the name suggests, the 13 Week Cash Flow model is a control mechanism detailing a business’s weekly cash flow. It uses the direct method to forecast weekly cash receipts less cash disbursements and is a critical tool for fine tuning your cash management particular during times of change. As I have said many times before “CASH IS KING” particularly when you need to ride out ‘unprecedented times’ and remain resilient.
By identifying the immediate cash flow needs at the most granular level, the model helps firms evaluate the immediate impact of a variety of possible operational, financial, and strategic changes.
Why does your business need it?
As a decision-making tool the 13CF model is something that people in my field, including me, believe you should have in operation all the time. It is an advanced warning device to make decisions, plan and frankly understand the viability of your business. Let’s face it, in business there are rarely ‘quiet times’ so whether the challenge is forced due to distress or to support growth having the ability to optimise your cash flow is key. With the end of the government furlough scheme just around the corner this is a prime example of when this model can come into its own.
Top Tips for really getting the most out of your 13 Week Cash Flow
As the finance experts you will know how to operate this model but how do you get the most benefit of using it within your business?
1. Manage your internal customers. Ensure Senior Stakeholders get sight and comment to give it the reverence the project needs.
2. Code name Rug Pulling. Often contains sensitive information so keep it confidential.
3. When it is for turnaround of change projects, show that you are serious and that this is important. Bring in an experienced expert and dedicated resources to handle the negotiations.
4. Use the right tools – your modelling may require a lot of data processing and calculations that to the wider business feel complex so it is worth designing a top line report and commentary that can be easily produced (at the touch of a button) each day to share with the senior team. Do the diligence to know the questions they have not what you think they want to hear. Honestly, I have seen teams working all hours to produce the management pack which just detracts from the getting the actual job done! Not to mention the burnout in these pressured times.
5. Ensure all the senior team understand what the model is illustrating and importantly what the impact of inflating or underrepresenting the numbers in their area will mean. This isn’t a time for them to ‘try to look good’ or ‘cover their backsides’.
6. See above - Transparency and accuracy is key to avoiding cockups. Be confident in your data sources – question, test and if go with your gut. If it doesn’t feel right, investigate. Or even bet bring in someone dedicated to setting this up and can ask the awkward questions.
7. Be cautious with assumptions and projections – capture the thinking - projecting sale figures on seasonal trending after 18 months of a pandemic and a so far ‘better than expected’ recovery is not going to be easy. I would always advise caution.
8. Talk to your customers ongoing not just when you need them to take delayed payment, change terms or speed up collections. Be consistent in your approach and build those relationships.
You may be thinking if the business is riding high at the moment then why do you need this level of micromanagement on your cash flow? Recent times have shown how quickly things can change. You may not need to be operating the 13CF model on a weekly basis but to have the structure and reporting capabilities defined and ‘ready to go’, in my view, is time well spent.
It you are looking for strategic support on how to implement cash management in your business then an experienced turnaround professional is a good short-term investment. Contact Simon.Jones@fortitudelondon.com