Turns out a key tool you’re probably using to evaluate customers could be less-than-reliable.

Check with your CFO: Are your customers using cash flow forecasts more and more frequently in their financials?

Warning: This tool is a lot less accurate – and less current – than earnings statements.

That’s from a new report out of the American Accounting Association.

Whether your company is evaluating prospective customers’ creditworthiness or keeping a close eye on existing accounts, it’s key info for Finance.

Cash flow forecasts are relatively new on the scene.

Their purpose: To estimate changes in business liquidity reflected solely in cash transactions.

As companies worry more about trading partners’ financial health, they’re relying on this info more. Last year, five out of every eight analysts’ earning forecasts came with cash flow forecasts.

So you’d think they’d be getting better at predicting, right?

Just the opposite – accuracy’s actually gone down over time.

That doesn’t mean your company has to toss this tool completely.

Tell Finance it’s all in the timing. Cash flow forecasts made early in the year for the coming one were inaccurate. But they’re a lot less inaccurate than ones later in the year (since they’re revisited less).

So the rule should be the earlier the better.