Question

Does senior management need to know every detail of your cash forecast? Do they need or want to know how each amount was arrived at? Is it risky to involve senior management too much in the cash forecasting process? What do they have to add to the process and do they really want to know?

Answer 1

No, the senior management does not have to know every detail about the cash forecast. The senior management is most bothered about the top line (Revenue) and the bottom line (Net profits). So, the top management will need the total cash available which can add to the profits or which can be given out to the investors as dividends. Yes, it’s risky to involve the senior management since they may not have the full knowledge of the exact working cycle of the business. Their main aim is to protect shareholder wealth for the management and in the want of protecting shareholder wealth they may not want to take any risk at all. The fact that they want to take no risk at all itself may be a risk and may not allow the business to work to its full potential.