See why your business needs to be tracking both profits and cash flow here. While the income and cash flow statements might, at first, seem similar, key differences make both essential for businesses. The cash flow statement shows the projected inflows and outflows of cash for the business, including operating activities, investing activities, and financing activities. The balance sheet shows the projected assets, liabilities, and equity of the business at a specific point in time. The income statement shows the projected revenues and expenses for the business, as well as the resulting net income or loss. It’s called a 3-way forecast because of the 3 financial reports it consolidates: Strong 3-way forecasts are robust and provide accurate and comprehensive forecasts typically over a 3-5 year horizon that are reported in quarterly increments.ģ-way forecasts use real time and historical data from your income statement, balance sheet and cash flow statement to provide an accurate forecast to be used in business analysis and management reporting. What is a 3-way cash flow forecasting?Ī 3-way cash flow forecast is a financial projection or model that combines the 3 main financial reports into one consolidated forecast. They’re also used by business owners and mangers when trying to evaluate business performance and financial health.Įlsewhere, banks and potential investors commonly review them when evaluating a business, so creating a 3-way forecast can be useful when trying to secure funding. Why is a 3-way forecast important for businesses?ģ-way forecasts are particularly useful in business planning, and when trying to improve the accuracy of your business decisions. Looking for a crystal ball? Would you settle for 3-5 year financial and strategic planning? A 3-way forecast may be just what your looking for.
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