Cash flow reports, why do we not support them?

A cash flow forecast predicts the cash inflows and outflows of a business over a specific period. This helps with liquidity management and decision-making. Businesses must ensure they have sufficient liquidity to meet obligations, plan for growth, and confront potential challenges by estimating future cash flows.

One primary reason why we do not generate cash flow forecasts is that future revenue is assumed to be constant. A large proportion of the businesses we support operate in industries where the income streams are irregular, which would lead to incorrect cash flow estimates.

Cash flow predictions depend a lot on assumptions about how much money will come in and go out in the future. In situations where these assumptions are uncertain or subject to significant variability, directors may question the reliability and accuracy of the forecasted figures.

Making expert guesses, or "best estimates," about future financial actions is a big part of cash flow predictions. When there is a lot of unpredictability or change in the market, directors might not want to base their long-term plans on these estimates.

Cash flow forecasts heavily depend on historical financial data and trends. However, relying solely on historical information can be limiting. Businesses may find it challenging to use predicted cash flows when historical data doesn't adequately reflect current market conditions.

While cash flow forecasts can be valuable tools for liquidity management and strategic planning, their limitations in certain business contexts cannot be overlooked. The inherent assumptions of constant revenue, reliance on uncertain predictions, and dependency on historical data can lead to inaccurate and unreliable forecasts. For industries with irregular income streams and rapidly changing market conditions, these challenges are particularly pronounced. Therefore, our decision not to support cash flow reports stems from a commitment to providing reliable and relevant financial guidance