Cash Flow Forecasting With Workday Adaptive Planning

Most clients have a good set of models for their income statement, but some have not spent a lot of time on planning their balance sheet. Basic balance sheet planning includes, at a minimum, assumptions and drivers for receivables and payables. Utilize days sales outstanding to project your accounts receivable and days payable outstanding for accounts payable, among others. Assumptions for a balance sheet might look like this below.

The easiest and fastest way to begin cash flow forecasting is to create an indirect cash flow forecast. In Adaptive Insights, we plan our balance sheet accounts and create attributes for each one and put them into the proper cash flow categories including changes in operating, investing and financing activities. Once these attributes are in place, formulas can be used in custom accounts to create the following indirect cash flow statement.

Direct cash flow takes a different approach than indirect cash flow by detailing the sources and uses of funds. In the example below, customer receipts are recognized in the sources section with uses including payroll and other operating expenses.

In Adaptive Insights, we can take either one of these cash flow statements and break them down into more granular time periods such as days or weeks. In the example below, I have taken the direct cash flow on a monthly basis as a starting point to create a daily cash flow. The estimated revenue receipts by customer are shown in the sources section. For uses, assumptions have been added for the number of days in the month and the payday. Similar assumptions can be made for other expense accounts. This can be a starting point for daily cash flow forecasting including supporting schedules for loans, pre-paids, etc. Actual daily direct cash flow results can provide a foundation for better forecasting as you build your expertise.