What is the best way for a dealer to forecast cash flow?

A resource that is used commonly in the auto finance industry is a 13-week cash flow model. This model demonstrates about a quarter’s worth of inflows and outflows and is valuable for strategy sessions and determining a dealership’s health as a company. The forecast is broken down into weekly reports, as opposed to monthly, allowing you to picture short term variability and giving you an opportunity to investigate details should any unexpected shortfalls arise.

Forecasting cash flow is much more than taking last year’s cash flow and dividing it by 12. Be sure to incorporate your current metrics and KPIs into a model that works best for you. For example, when you are in a growth scenario you will want to consider certain aspects such as upfront costs, increase in employees, etc. and implement them into your model to get the most accurate forecast.

Cash flow is critical for any dealer, whether they are focused on retail, BHPH, LHPH or a mix.

Have additional questions? Contact Trevor Watson at TWatson@lhph.com.