Treasury plan: increase your visibility and optimize your SME’s cash flow
Are you able to invest and develop your business? Will you face periods of instability? How can you anticipate them? By setting up a treasury plan and reliable forecasts, you will be able to answer all these questions and optimize your cash management.
What are a treasury plan’s goals?
Cash management is about monitoring and anticipating cash inflows and outflows in order to maintain the company’s financial balance. An SME generally has a lower financial visibility and a smaller social capital than a corporate group. This is why it is even more important for SMEs to create a treasury plan and to have reliable forecasts in order to optimize their cash management. You will be able to anticipate your cash flow needs or excesses, and then to make wiser decisions. To do so, you must monitor and make a regular inventory of your cash flows, and most importantly, you must have permanent treasury forecasts.
How to create forecasts for your treasury plan?
It is necessary to back up your strategic decisions with treasury forecasts. The more accurate and reliable your forecasting data are, the better your visibility will be. You will need to take into account several financial indicators, and avoid some pitfalls when creating your forecasts.
Indicators you have to include in your forecasting plan
To develop your treasury plan, you will have to list the indicators corresponding to your cash inflows and outflows in your forecast table:
- Collections of product and service sales, and customer invoices
- Expenditures for supplier payments, salaries and other recurring or one-time expenses
- Your treasury balance
- Your WCR (Working Capital Requirement)
- Your company’s profitability
- Your investments’ profitability
Be sure to determine a planning horizon for your forecasts. Your treasury plan may cover a few weeks or several months, so it’s up to you to determine what will give you the most reliable and accurate forecasts possible.
If your business is mature, you probably have a list of expected sales and data from previous years. If your company is young, you may not have a lot of data yet, so don’t plan too far in the future, as your forecasts may be less reliable.
Pitfalls you have to avoid to have a reliable treasury plan
When entering your forecasts into your treasury plan, avoid oversights or errors. Consider the following items:
- Payment deadlines: make sure your customers pay on time
- Variable expenses: apply conservative assumptions to anticipate them
- VAT: the amounts of VAT to be collected or paid should be included in your treasury plan
Which tool should you choose for your SME's cash management?
1. An Excel table
Excel offers you some freedom, but it does not fully cover the objectives of an efficient cash management. You will have to enter all your forecasts manually and keep them constantly updated to avoid calculation errors.
Besides being time consuming, it is not reliable over time and does not provide you with sufficiently explicit reports.
2. A cash management software
A specialized software will be a better option to create a reliable treasury plan quickly.
The Cegid Exabanque software will simplify the task, and allow you to completely manage your forecasts. Thanks to its Treasury module, Exabanque :
- Simplifies the budgetary codification of your treasury transactions,
- Automatically calculates your forecasted cash flow,
- Automatically generates recurring forecasts (rent, salaries, etc.)
- Generates charts and graphics to give you a better visibility on the evolution of your cash flows,
- Facilitates the analysis: visualize your forecasted statement by bank account and in consolidated format,
- Automatically takes into account the payment and direct debit remittances when they are sent to the bank,
Automatically adjusts the balances when the transaction is completed.
