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What is the best practice of a cash flow forecast for a brokerage company?

Huyen Ngo's Profile

The brokerage company (securities company) has fluctuated income from service fee, margin lending, term deposit, proprietary trading (bond, stock, etc), so how to prepare a cash flow forecast especially for income? should it perform rolling cash flow forecast? and how long for a rolling cash flow forecast (12 months, 18 months, etc)?


Topic Expert
Regis Quirin
Title: Director of Finance
Company: Gibney Anthony & Flaherty LLP
LinkedIn Profile
(Director of Finance, Gibney Anthony & Flaherty LLP) |

Cash flow planning and forecasting is the same, regardless of the business type. Understand your revenue cycles and your expense cycles. A rolling forecast looks great, but it dis-associates cash flow generation from initiatives. It is history based. You are predicting what will occur 12 months from now, based on what happened last month, not considering new customers and new products/services in development.

You can make adjustments for the projected financial environment and expected consumer sentiment, but then the planning process becomes a function of the Finance Department, removing the responsibility from Production.

I am not a fan, but it does work quite well for mature companies in a mature market.

Topic Expert
Wayne Spivak
Title: President & CFO
LinkedIn Profile
(President & CFO, |

This brings up a lateral issue, which Regis touched upon.

Why is it that every business/industry thinks that they are different and unique from another business/industry.

Forgetting some of the obvious differences (manufacturer vs service, etc.) everyone has cycles, credit issues, customers, products (services), etc.

Topic Expert
Jaime Campbell
Title: Chief Financial Officer
Company: Tier One Services, LLC
(Chief Financial Officer, Tier One Services, LLC) |


The wisdom from my Proformative colleagues above is excellent.

Models are more useful than forecasts, and since you want to re-use it over time, models are more valuable to you. Invest more time up front in putting together a dynamic model instead of single-use forecast, and later on, updating it is very easy.

The most effective duration for forward-looking internal planning tools is at least one business cycle and not more than two cycles.


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