Cookies help us display personalized product recommendations and ensure you have great shopping experience.

By using this site, you agree to the Privacy Policy and Terms of Use.
Accept
SmartData CollectiveSmartData Collective
  • Analytics
    AnalyticsShow More
    sales and data analytics
    How Data Analytics Improves Lead Management and Sales Results
    9 Min Read
    data analytics and truck accident claims
    How Data Analytics Reduces Truck Accidents and Speeds Up Claims
    7 Min Read
    predictive analytics for interior designers
    Interior Designers Boost Profits with Predictive Analytics
    8 Min Read
    image fx (67)
    Improving LinkedIn Ad Strategies with Data Analytics
    9 Min Read
    big data and remote work
    Data Helps Speech-Language Pathologists Deliver Better Results
    6 Min Read
  • Big Data
  • BI
  • Exclusive
  • IT
  • Marketing
  • Software
Search
© 2008-25 SmartData Collective. All Rights Reserved.
Reading: How to Stay Out of Cash Flow Crises Using Cash Position Analysis
Share
Notification
Font ResizerAa
SmartData CollectiveSmartData Collective
Font ResizerAa
Search
  • About
  • Help
  • Privacy
Follow US
© 2008-23 SmartData Collective. All Rights Reserved.
SmartData Collective > Big Data > Data Quality > How to Stay Out of Cash Flow Crises Using Cash Position Analysis
AnalyticsBusiness IntelligenceData QualityData VisualizationData WarehousingPredictive AnalyticsRisk Management

How to Stay Out of Cash Flow Crises Using Cash Position Analysis

Keith Peterson
Keith Peterson
6 Min Read
SHARE

Cash Position Waterfalls are “easy” to implement – if you have the time and patience.

Contents
Cash Position Waterfalls are “easy” to implement – if you have the time and patience.Cash Position Waterfalls are “easy” to implement – if you have the time and patience.

Cash Position Waterfalls are “easy” to implement – if you have the time and patience.

Cash flow is the lifeblood of every company. Diligent financial analysis, including the Cash Position Waterfall, is an essential component to monitoring the current health of your business. However not all of us are financial analysts who like to wade through detailed spreadsheets.

This is where good data visualization comes in. By presenting information in graphical form, every manager can grasp what is happening with cash flow. And, when every manager understands the important business metrics, most companies will achieve far greater success.

More Read

analytical hub architecture
5 Principles of Analytical Hub Architecture (Part 1)
PMML and Open Source Data Mining – Predictive Analytics on the go!
Predictive Analytics in the Cloud Research on SmartData Collective
Trying out glmnet: a case study in open-source development
PyCon 2008 ElasticWulf Slides

Why is a Cash Position Waterfall essential to survival?

The idea behind a Cash Position Waterfall is simple and generating a waterfall chart is easy. The key is to understand what data are needed and how to organize it. But before going there, let’s take a minute to review the “what” and “why” of cash position analysis and forecasting.

For mid-size and fast growing companies, keeping track of cash position and cash flow in a meaningful way is difficult! The statement of cash flows is a standard component in a set of financial statements and is used to reveal the sources and uses of cash by a business. It presents information about cash generated from operations and the effects of various changes in the balance sheet on a company’s cash position.

Cash flow is most commonly calculated using the indirect method. It can easily be derived from existing reports within the accounting system. The indirect method takes net income and adds or deducts non-cash revenue and expense items, resulting in net income generated by operations. However, the preferred method for reporting purposes is called the direct method. The advantage of the direct method over the indirect method is that it reveals operating cash receipts and payments. Unfortunately, the direct method is rarely used because the information in it is difficult to assemble; companies simply do not collect and store information in the manner required for this format. Using the direct method may require that the chart of accounts be restructured in order to collect different types of information.

A simple approach to financials for visual managers

The main benefit of the direct method is that it provides visualization of cash position. The waterfall chart simply and quickly summarizes company cash inflows and outflows. If you look at the chart below, you will notice that there are many different outputs (expenses) compared to the few inputs (revenues). Expenses are typically more reliable and consistent than revenues. This is what keeps managers awake at night!

The cash flow waterfall is the only view into all the cash items that must be managed to keep a company afloat.

The Cash Position Waterfall is employed to calculate and monitor the net movement in cash balance as well as the ending cash balance for a given period. With this information, a company will know if it is meeting its financial and operating objectives, and, if not, how serious the problem is and most importantly – what is causing the problem.

The Cash Position Waterfall more specifically ensures that cash inflows and outflow items are prioritized in the best interest of the business. When cash is tight, segmenting and prioritizing debt payments can be key to managing suppliers and cash flow.

Build a Cash Position Waterfall today

Back to how to build a Cash Position Waterfall. All the data is in the chart of accounts and will typically reside in a general ledger table in your financial system.

To build a cash flow waterfall, all cash flow items are organized in the order in which they occur. The main categories could be:

  • Revenues
  • Expenses
  • Tax
  • Debt service
  • Distributions
  • Net movement in cash balance

Key outputs are a series of cash flow trends. The specific line items of value are:

  • Net cash position
  • Source and size of debts
  • Source and size of revenue

And, by using an interactive dashboard, we can drill down to the detail within each expense area to help strategically manage cash. On the dashboard above, trade shows are clearly the greatest expense. By drilling down to line item detail, we can make more informed decisions about where to re-allocate or cut.

Share This Article
Facebook Pinterest LinkedIn
Share

Follow us on Facebook

Latest News

sales and data analytics
How Data Analytics Improves Lead Management and Sales Results
Analytics Big Data Exclusive
ai in marketing
How AI and Smart Platforms Improve Email Marketing
Artificial Intelligence Exclusive Marketing
AI Document Verification for Legal Firms: Importance & Top Tools
AI Document Verification for Legal Firms: Importance & Top Tools
Artificial Intelligence Exclusive
AI supply chain
AI Tools Are Strengthening Global Supply Chains
Artificial Intelligence Exclusive

Stay Connected

1.2kFollowersLike
33.7kFollowersFollow
222FollowersPin

You Might also Like

Context-aware shopping at Stop & Shop

3 Min Read

Wil Wheaton is Just Some Guy, You Know?

4 Min Read
data-driven lead generation
Analytics

Five Proven Lead Generation Strategies to Merge with Data Analytics

8 Min Read
A good UX leads to effective business intelligence analytics
AnalyticsBusiness Intelligence

Is UX Important To Business Intelligence Analytics?

12 Min Read

SmartData Collective is one of the largest & trusted community covering technical content about Big Data, BI, Cloud, Analytics, Artificial Intelligence, IoT & more.

ai is improving the safety of cars
From Bolts to Bots: How AI Is Fortifying the Automotive Industry
Artificial Intelligence
AI and chatbots
Chatbots and SEO: How Can Chatbots Improve Your SEO Ranking?
Artificial Intelligence Chatbots Exclusive

Quick Link

  • About
  • Contact
  • Privacy
Follow US
© 2008-25 SmartData Collective. All Rights Reserved.
Go to mobile version
Welcome Back!

Sign in to your account

Username or Email Address
Password

Lost your password?