Do corporates really know what is “eating and feeding” their cash? Why are treasury staff still wasting time extracting balances manually, fumbling with bank portals, and then dealing with endless spreadsheets? Mark O’Toole explains how treasurers can streamline cash flow forecast processes and, in turn, fuel business growth.
Many of us would imagine that treasury and finance departments have by now perfected their cash forecasting, giving the CFO a level of confidence in the numbers. Surprisingly, that doesn’t appear to be the case. In fact, in recent years, global benchmarking studies from PwC and Deloitte have highlighted cash and liquidity risk as the most important challenge to manage.
The reason for this emphasis is simple: having an accurate cash flow forecast and understanding the underlying drivers can help treasurers foresee potential problems that may arise in the year ahead.
With increased global uncertainty, interest rate rises and regulatory change combined with the challenges around managing a complex internal ecosystem of multiple banks, ERPs, FX exposure, and geographic entities, many companies globally are increasing their efforts regarding cash flow forecasting. Some accomplish this with more impactful results than others.
There are three key factors that can help organisations turn bad cash forecasting (i.e. not transparent, manual, inaccurate, and time consuming) into good cash forecasting (i.e. accurate and efficient).