Cash flow management and forecasting are, and will always be, integral elements to business success. But the way manufacturers approach this is changing. Consumer buying decisions are changing, interest rates are changing, and the speed of this evolution is changing faster than ever. Especially in an election year, when trade and tax policies are on the table.
“If everything else is changing – why would we think our approach to forecasting, budgeting, and cashflow management would not have to change?” asks Donna Funk, Pinion biofuels advisor.
To move business forward, management teams today will need to start by shifting their mindsets and re-examining many of their assumptions. What worked last year may not work in the years or even months ahead.
3 New Approaches for Forecasting and Cash Flow Management
Here are three impactful approaches to improve how you handle cash flow and forecasting in today’s market:
1. Increase communication across business lines
It’s time to challenge the idea that forecasts and cash flow management are for conversations in the accounting office or the board room. Today, companies should be sharing clear, relevant and timely information across departments and levels.
Pro Tip: Share with employees the company’s goals, achievements, and ongoing challenges. Just as important, communicate where you currently stand on your goals and what still needs to be accomplished to achieve them.
This knowledge will enable them to make more informed and relevant predictions during forecasting discussions, ensuring that they focus on the most critical elements that align with the company’s strategic direction.
“Empowering your teams with knowledge transforms them from casual participants to passionate advocates,” explains Funk. “You don’t have to share all the details across business lines, but keep in mind that informed employees are engaged employees.”
2. Step up proactive planning and reevaluate often
In this fast-moving market environment, it’s critical to frequently reevaluate your business strategies. The reality is that the days of annual forecasts are gone. To stay ahead, businesses need to replace their set-it-and-forget-it approach with a “living” plan that is consistently updated and evaluated.
Normally, companies evaluate monthly by comparing ‘budget to actual.’ Now, we see the need for continual monitoring of variance in thresholds, but also the budgets in the first place. Inputs, for example, will now fluctuate based upon price, availability, budgets, and other variables beyond control.
Pro Tip: Reevaluate your Key Performance Indicators (KPIs) dashboard, communicate risks, and adjust based on where things go and where things need to be. Determine what your risk tolerance level will be, what opportunities you foresee, and build a proactive plan to control what you can. Then reevaluate all of these, often.
“By embracing flexible planning, you don’t just adapt to changes – you anticipate and lead through them. This is how your organization remains resilient and forward-thinking,” says Dayana Viveros, Pinion manufacturing business strategist.
3. Look forward, not back
It’s important to learn from the past – but don’t get stuck there. Identify the root cause of past failures, but then look to the future. Implement solutions, systems and course corrections to avoid making the same mistakes. This continuous cycle of evaluation, learning, and improvement is vital for long-term success and sustainability.
Pro Tip: Keep documentation of what worked, what didn’t and why. We forget details as time passes; but you can set others up for success in the future by having that history recorded. They don’t need daily diaries, but the big-picture items with key points and the “I wish I’d known that or would have done this” lessons.
“It isn’t about quick fixes, but about making strategic adjustments that address underlying issues,” Viveros advises.
Learn to Pivot
Navigating the new normal in managing forecasts and cash flow requires a proactive, informed, and flexible approach. By increasing communication, reevaluating strategies frequently, and focusing on forward-thinking solutions, businesses can adapt to rapidly changing conditions and position themselves for sustained success.
Reach out to Pinion’s manufacturing business advisory team to discuss the impact of incorporating these financial strategies and management plans into your business.
