Note: Cash forecast and Cash Flow are different as we are looking at cash coming in from your Account Receivables. To get a complete view of your Cash Flow you should also look at your Account Payables, Inventory etc.
How does the cash forecast model works?
We aggregate all the invoices in batches per month and based on your collection speed (displayed in your billing cohort ; read from left to right), we estimate how much cash is likely to come in, in the next few months.
Note: we are assuming invoices are sent on the same date, at the beginning of the month. If you have a very low number of invoices that constitute most of your Revenue, the estimates might not be as accurate.
The idea is to assume the collection from previous month. For instance, looking at the chart below we can assume that the average collection for the first month of each cohort is an average of 86%, 73%, and 91%, so around 83%. We assume that at the end of the first month of the cohort of Nov 2021 we will have collected 83% of what has been billed this month. We follow the same reasoning to calculate the cash coming in for the 2nd month of October's cohort, and so on to create a view of the cash coming in for November.
Why not using the DSO?
The DSO is an average measure of your collection. We want to provide you with a more aggregated way of computing the cash coming in compared to an invoiced-based projection. It may also be complicated to project the payment of an invoice that is still coming in past issue date + DSO.
For instance: if I send an invoice on the first of November for $100 with an average DSO of 45 days, you could expect to be paid on the 15th of December. However, if you are not paid on the 15th or before, projecting the cash attached to this invoice is very complicated, as you are still likely to be paid but we don't know when.
I don't know all or some of my upcoming sales numbers, will I be able to use the cash forecast feature?
Yes, you can input the numbers you know! We can also assume it's 0, but you will still be able to see how much cash will be coming in that is originating from your past sales.
The projected sales numbers are disappearing after I refreshed my page or go somewhere else, is this normal?
Yes. For now, the numbers you input are not stored in Upflow. If you feel like they should, please let us know!