Cash flow planning

One difficulty in cash flow planning is to realistically map your company's payment targets. Different payment targets are defined with each supplier and for each expense, which naturally complicates cash flow planning considerably and requires complex calculations. The risk of formula errors in Excel is therefore immense.

To reproduce these complex events in a reduced way is one of the challenges in cash flow planning. Here, for example, DSO and DPO can be used, i.e. Days Sales Outstanding and Days Payable Outstanding. The DSO metric tells you how many days it takes for an expense to become a payment. If you have a DSO of 30 days, then it means waiting an average of 30 days for that revenue to actually hit your company's bank account. DPO is about what the average payment term is for your expenses. So, if you deposit 40 days payment term, it means for every expense you purchased, you pay on average after 40 days. This can also be the case the other way around, if you take advantage of cash discounts, for example. Then the DSO would probably be closer to 10 days, as it depends on the payment term agreed with the supplier.

Another challenge is that very many detailed plans or even additional investment plans have to be combined in the cash flow planning. This often leads to transfer errors to Excel and a very complex planning table. In connection with cash flow planning, sales tax must also usually be taken into account in the individual detailed plans, which often leads to planning errors.