Systems Dynamics and Cash Flow Planning‐A Model for Accountants

Abstract

This paper aims to explore the applicability of Systems Dynamics Methodology (SDM) to the formulation of long‐range cash flow policies. It also explains how the information generated from the model aids in understanding the behaviour of cashflow through time and helps in determining cash deficits, excess cash, including timing, and the contruction of cash budgets under different cash control policies. After a brief introduction which explains the basic ideas behind SDM, the structure of the model is developed and described and the results of a hypothetical example analysed. This is followed by some comments on practical aspects of implementing the model in real life and its potential for cash flow planning and control.