Optimization of the company's cash flow

These three presentations are well only one and the same method of approach to the cash flow forecast in terms of
resources and jobs. The value of this method obviously lies in the method of calculation of the movements of the
elements of the heritage.
3.2.2 - ESTIMATES OF CASH FLOW IN TERMS OF 'RESOURCE NEEDS.
The problem may be considered in two ways:
Either, the extrapolation of the commitments passed; although, again, the estimation of future working capital
requirements.
1 - THE EXTRAPOLATION OF THE ACTUAL COMMITMENTS.
This approach is the easiest to follow natural route but is limited in scope.
(a) THE PRINCIPLE:
It is to analyze the impact of revenues and expenditures on the elements of the heritage. Knowing the past, operating
and non-operating, commitments on draws up accounts of outcome of the coming months.
From these result accounts estimates and informed about the terms of payment as a whole, it is developing a cash
budget in terms of expenditure and revenue. It is possible to draw up an estimate for the month to come, and hence
calculate the movement of working capital needs and possibly that of the Working Capital Fund, justifying the final
cash position.
(b) THE SCOPE OF EXTRAPOLATION OF THE COMMITMENTS:
Taking into account the various methods of payment commonly used, it is hardly possible to predict a significant cash
beyond the second coming month position. Therefore, this procedure cannot be validly applied in the case of
companies having a fairly regular activity if you want to anticipate the financial balance in the coming months. Any
change in operating conditions may be taken into consideration that in the realization of the commitments. However,
few companies are able to predict accurately the commitments coming due to the large number of factors which
give rise to and modulate the cash flows transiting by the company: competition, economic situation, social climate,
price, etc. This explains the inaccuracy of thus established forecasts for the balance of cash beyond 30 to 60 days,
and even sometimes below, if the time between commitment and corresponding cash movement is short.
In this regard, it would seem much more efficient, rather than "guess" the appearance of speculative money flows,
estimated using statistical methods and simulation future working capital requirements.
2 - ESTIMATE OF FUTURE WORKING CAPITAL REQUIREMENTS:
Knowledge says changes in cash and flows that cause has no meaning that daily and value date. The tools are:
accounting for commitments and taking account of the conditions of Bank.
The aim is: control of the flow of inputs and outputs of funds, in order to minimize the cash and financing at the
lowest cost lack of irreducible synchronization between receipts and disbursements. To the - beyond the very short
term cash flow is impossible and unnecessary. Indeed, what matters then, resides in the apprehension of the heritage
movement, and in particular items that fluctuate according to the pace and nature of cycle operation, or even
according to the situation: the active and the passive circulating; or working capital needs. The evolution of the
working capital needs, in light of available working capital, is empower themselves to an optimal choice of the
financial structure of the firm, in a monetary environment national and international given.
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