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Why is cash flow forecasting still an issue?
| 09-07-2019 | by treasuryXL | Kendra Keydeniers
Cash forecasting is a vital part of the treasury role – and for all too many treasurers it’s a time consuming, difficult job where insufficient system support makes data management, analysis and reporting a time-consuming nightmare.
However, the good news is that it doesn’t have to be that way! In this insightful webinar hosted by The Global Treasurer and Analyste, they will:
- Discuss why cash forecasting is still an issue
- Delve into the barriers preventing corporate treasurers from making cash forecasting a simple task
- Investigate the technology solutions making it easier than ever before
- Work out a roadmap that will help treasurers ease their cash forecasting worries
The first step towards simplified cash forecasting: Register now for the Webinar on 17 September 2019 from 11:00AM to Midday BST
Cash flow prognoses zijn van vitaal belang in corporate treasury
| 29-11-2018 | Cashforce | treasuryXL |
De lancering, eerder deze week, van het nieuwe liquiditeitsbeheerportaal van HSBC, moet begin volgend jaar worden gevolgd door een nieuw Cash Flow Forecasting-platform, dat laat zien hoe liquiditeitsbeheer en kasstroomvoorspellingen met elkaar verweven zijn. Er is een groeiend aanbod van leveranciers die zich op dit gebied concentreren, waaronder onze partner Cashforce.
Cashforce maakt verbinding met alle gegevensbronnen die het geld beïnvloeden, om een zeer nauwkeurige cash forecast te bouwen. Slimme algoritmen worden toegepast om nog meer nauwkeurigheid te bieden en zullen
pro-actieve optimalisatie acties tonen. ”
Het belang van kasstroomprognoses neemt steeds verder toe. Bruce Lynn, Managing Partner bij The FECG LLC, is bezig met de laatste fase van zijn onderzoek onder 200 bedrijven wereldwijd en hun gebruik van cash flow forecasting en werkkapitaal management. Hij is van mening dat het belang van cash flow forecasting toeneemt omdat er sinds 10 jaar weer sprake is van een stijgend renteklimaat. Hij vindt dat:
- De ‘beste’ bedrijven dit belang zullen erkennen en trachten de inherente variaties te verkleinen die zullen optreden omdat de toekomst onzeker is.
- Ze zullen moeten investeren om “zichtbaarheid” te verkrijgen over hun “stromen” (werk, contanten, boekhouding, informatie). Investeringen zullen niet alleen veranderingen op treasury afdelingen, maar ook operationele afdelingen met zich meebrengen waar de grotere cashflows plaatsvindt.
- De “slimmere” bedrijven zullen hun personeel naast de bestaande beloningen ook belonen voor het genereren van meer en stabielere kasstromen
- Probleem (zoals onderzoek lijkt aan te geven): gebrek aan informatie op operationeel niveau; relatieve onbelangrijkheid van kasstromen versus winst. Hoge afhankelijkheid van de technologie van 1980 (dat wil zeggen spreadsheets)
- De overige bedrijven zullen hun kapitaalkosten zien stijgen naarmate ze overgefinancierd raken of te weinig investeren. Het risico zal vooral hoog zijn voor bedrijven die vreemd vermogen gebruiken om het verwachte rendement van het eigen vermogen te verhogen.
Binnenkort zal er een survey uitgebracht worden waarvan de resultaten hier gedeeld zullen worden.
Cashforce – Cash forecasting & Smart Treasury
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SANCTIONS IN LOAN AGREEMENTS; A BORROWER’S PERSPECTIVE
| 8-11-2018 | Solusius Treasury Lawyers | treasuryXL |
Introduction
Compliance with sanction laws is an important topic in loan documentation. In view of increased sanction legislation, intensified enforcement and huge potential fines, lenders insist more and more on stringent clauses to ensure compliance with sanction laws by borrowers. While some years ago sanctions were no topic at all, lenders currently include sanction related representations, general covenants and information covenants in loan agreements. Many lenders fear reputational risk if a client violates sanctions and lenders tend to draft sanctions clauses that are more restrictive and broader than the sanction laws applicable to the borrower or even to the lender itself. Such broad sanction clauses may hamper the borrower in its ordinary course of business and increase the risk of an event of default under the loan agreement considerably. A description of sanction laws and the specific impact thereof for corporates are outside the scope of this article; here only sanction wording in loan agreements will be addressed a borrower may be confronted with.
Negotiating sanction clauses
Unfortunately, negotiating sanction wording tends to be difficult. Lenders often argue that the proposed wording is standard wording for the bank(s) and that deviations cannot be made. Although this argument is used, negotiation is always possible. It is important to bear in mind that there is no market consensus about sanction requirements; each bank has its own sanction policy and its own preferred wording in loan agreements. The standard sanction wording of the bank acting as documentation agent is often used as a starting point when drafting sanction wording. Other lenders in the syndicated or clubbed transaction may subsequently add additional requirements to comply with their internal procedures. Sanction clauses therefore may include duplicate requirements and could be rather restrictive for the borrower. However, if the suggested wording is jeopardising business opportunities or is too burdensome for the borrower, even companies with limited negotiating power can negotiate the sanction clauses to become more workable.
Sanction clauses and LMA
The Loan Market Organisation (‘LMA’) has not published recommended sanction provisions in any of its forms of facility agreement. In 2014 the LMA recommended in its Guidance Note to consider to include a representation that the borrower is not a target of sanctions and an undertaking to provide lenders with comfort that the proceeds of the loan will not be used in any way which would violate any applicable sanctions regime. The LMA states that the precise wording of any such representation and undertaking will depend on the transaction, the parties involved and the sanctions regime(s) that the parties wish to address. Unfortunately, these days many lenders incorporate much broader sanction related clauses in all loan agreements, independent of the situation of the borrower.
Although there is no market consensus about sanction wording in loan agreements, there are many similarities between the sanction wording required by lenders. Sanction wording is generally included in the following (LMA) sections of the loan agreement: definitions, representations, general covenants, information covenants and event of default. When negotiating sanction wording the following elements may need to be negotiated: applicable sanctions, scope of compliance, sanctioned person, sanction investigation, use of loans, use of bank accounts, compliance procedures, materiality and consequence of breach of sanction obligations. In the paragraphs below each of these topics will be addressed.
The full article can be read on the website of Solusius Treasury Lawyers.
Maarten Steyerberg – Founder and Senior Legal Counsel Solusius
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Masterclass Cash Management
| 29-10-2018 | treasuryXL
Op 6 december 2018 organiseert Alex van Groningen een masterclass Cash Management. Hoe spoort u verborgen cash op en hoe speelt u het vrij? Richt een effectief cash management systeem in en optimaliseer het bedrijfsresultaat, het werkkapitaal en de liquiditeitspositie.
Hoe spoort u verborgen cash op en hoe speelt u het vrij?
Cash management expert Eva Borstlap onthult aan de hand van diverse actuele casussen (o.a. Blokker) maatregelen die met beperkte actie een groot positief effect op zowel de effectiviteit, het rendement als de liquiditeit van de organisatie hebben.
Onderwerpen
- De essentie van cash management: wat is het wel en wat is het niet
- De relevantie van een gezonde focus op cash
- Financiële besturing; samenhang tussen de operationele-, investerings- en financieringsactiviteiten en hoe deze te meten (oa EVA/NPV, futures en SWAPS)
- De essentie van werkkapitaal en waarom pure sturing op werkkapitaal niet zinvol is
- Theorie vs praktijk; waarom is de praktijk weerbarstig (Blokker casus)?
- De directe relatie tussen cash management met de operationele processen en de verborgen cash die in elke organisatie aanwezig is
Voor wie?
Dit programma is specifiek ontwikkeld voor (assistent) financial- en business controllers, financieel managers en andere financiële professionals die nieuwsgierig zijn hoe zij zelf een concrete bijdrage kunnen leveren aan het genereren van extra cash.
Programma
09:30 – 10:00 uur | Introductie
- Introductie en verwachtingen deelnemers
- Waarom de focus op cash essentieel is
- Een wandeling door een Jaarrekening; relatie tussen resultaat en cash
10:00 – 11:00 uur | De essentie van Treasury
- Groepsopdracht rondom het thema ‘resultaat en cash’
- Theorie: De essentie van Treasury en de relatie met de operationele de bedrijfsprocessen
- Welke rol kan/moet een financial hierin spelen?
11:00 – 11:15 uur | Koffie en thee pauze
11:15 – 12:30 uur | Financiële besturing: theorie en praktijk
- Theorie: wat is de financiële besturing van een organisatie (operationele-, investerings- en financieringsactiviteiten)
- Welke parameters en risico management zijn relevant (oa de werking van Futures, NPV, EVA, Swaps)
- Theorie vs praktijk; waarom de theorie niet altijd werkt (case ABNAMRO)
12:30 – 13:00 uur | Lunch
13:00 – 15:00 uur | Verborgen cash in het werkkapitaal
- De essentie van werkkapitaal; waarom het vooral geen ‘finance feestje’ is
- Methoden om werkkapitaal eenvoudig en snel te kunnen beoordelen
- Inzoomen op de verborgen cash in de operationele bedrijfsprocessen
- Waar zit de cash ‘verstopt’?
15:00 – 15:15 uur | Koffie en thee pauze
15:15 – 16:00 uur | Opsporen van verborgen geld & Blokker
- “Het opsporen en vrijspelen van verborgen cash” in de eigen praktijk
- Introductie Blokker; Wat is er aan de hand; een wandeling door het Jaarverslag
16:00 – 16:45 uur | ’Hunt for cash programma’ Blokker (Case)
- Interactief spel om te ervaren voor welke dillema’s een bedrijf als Blokker staat en waarbij de theorie en alle genoemde ervaringen in de praktijk worden gebracht
16:45 – 17:00 uur | Samenvatting, evaluatie en afsluiting
Bel voor meer informatie of een offerte met Ivo ten Hoorn op 020 639 0008.
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Best read articles of all time: Do treasurers really need instant payments? some implications.
| 03-08-2018 | Patrick Kunz | treasuryXL
Per 13 January 2018 we have a new payments service directive (nr. 2) live in the European union, PSD2 for short. One part of PSD2 is the possibility for banks to offer instant payments between banks in the EU. Within max 10 seconds money flows from one bank to the other, also on weekends and on holidays. In this paper I want to discuss the implications for treasurers of instant payments.
Cash flow forecasting
Forecasting is an important part of the daily/weekly routine of a treasurer. He/she needs to predict the future to know his cash/risk/financing position. On the ultra-short term spectrum of this forecast a treasurer might use intraday bank statement (MT942) to take into account the incoming funds during the day. These are often updated hourly. With instant payments a treasurer can have a look at their bank account and the balance that is showing is the real-time balance with all incoming transactions being settled. As said before a treasurer might already have intraday statements but there is (1) a time lag in those and (2) there might be transactions not processed yet. Bottom line this difference amounts to several hours lag. Depending on the size of the company and the amount and size of transactions there is some impact but not very sizeable. Furthermore, those treasurers that do not use intraday balances for their forecasting have no impact of instant payments. However, how about the due payments on non-working days? In the future these are normal payments dates. Previously due payments on weekends are either set on Friday or Monday depending on the terms of the contract. These could now be forecasted on the exact day. But that depends, payments are often done during business hours, so it is possible that nothing changes. Depending on the size of the transactions there is importance to check this with your suppliers and clients. This also depends on bank processing of yourself and your client/supplier.
Bank processing
Instant means instant in time but also in days. In the past we were dependent on the opening hours of the banks and later of the ECB. That could mean that if we send money just after close on Friday and there was a public holiday on Monday we would only see the money coming in on Tuesday. The money was “lost in translation” in between. This is not very modern in an age where we send an email from Tokyo to South Africa in minutes but not money. We could literally fly there with cash and be faster. After all banks have implemented PSD2 money flows 24/7. So also in the weekend and on holidays. This has an impact on the processing of your bank statement. You now receive bank statement for Saturday and Sunday. Most accounting/treasury departments do not work on the weekends so there is a chance that these statements are not processed. This means you must process 3 statements on Monday. Some companies have automatic processing of bank statements, so the weekend statements might be processed but not (automatically) consolidated leading to more open positions on Monday. Ok big deal, there is more work to do on Monday due to more bank statements. But there is more: not necessarily for treasury departments. Think about customer services (helpdesk) departments. If a client with an overdue payment calls it would be great if the helpdesk employee is able to verify statements of the customers if the says he has paid or will pay immediately. This however only works if processing is automatic or if the helpdesk employee can access/search the incoming payments on the bank account (which might not have processed in accounting). Not all companies will have this yet. Overdue calculations might be faulty in some ERP systems as only working days are considered. If a payment is due on Sunday, you can pay on this Sunday and not necessarily on the Friday before.
Conclusion
Instant payments are only a fraction of PSD2 which is often not very interesting for most treasurers. They get some information faster but that does not really help them too much. There is however more to it. Since payments can now arrive and be made in the weekends the cash flow forecasting should now contain 7 days in a week instead of 5. Payment can be spread out more but also receipts will be. Bank processing is more work; 7 daily statements per bank account per week instead of 5. Extra processing or extra automation needed. The extra information might be needed by other departments too even though the treasury/accounting department is not working.
Overall the implications could be bigger then you might think and are different for every company and depending on their existing (bank) processing.
Most bank are planning to introduce weekend reporting by H2 2018 while instant payments are due beginning 2019. For business transactions this might even take until H2 2019.
Some time left but a good time to already think about your current processes in comparison to the new reality under psd2. Treasury is moving to a 24/7 information economy. It’s about time.Time will tell if there will be fintech’s stepping in helping with above issues with direct connections to the bank, which is another important part of PSD2 but not within the scope of this article.
If you need help with automating your bank statement processing or with your cash flow forecasting, then look at this author and other Flex Treasurers on this website for answers.
Treasury, Finance & Risk Consultant/ Owner Pecunia Treasury & Finance BV
What is the Treasurer Test
The Treasurer Test will take approximately 70 – 100 minutes to complete. It consists of two parts:
-
- Technical Treasury Knowledge.
This part is build out of multiple-choice questions that measure knowledge in the following 4 functional areas:– Cash management
– Risk management
– Corporate Finance & Funding
– Miscellaneous TreasuryEach area contains 30 questions with a time limit of 10 minutes.
Duration: 4 x 10 minutes.
- Personality Profile
This part comprises a personality assessment based on the “Big Five Theory”.
There is no right or wrong. This section consists of statements in which you must indicate whether or not this applies to you.Total number of questions: 80
Duration: 30 – 60 minutes
- Technical Treasury Knowledge.
After finishing the Treasurer Test you will receive a report. This report will show you the results as an absolute and as a bench marked score against your peer group.
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Frequently asked questions
TEST
What will be tested?
Your current Treasury knowledge will be tested, built through experience and study. The Treasurer Test assesses your technical knowledge level in corporate treasury, using questions about Cash management, Miscellaneous, Risk management and Corporate Finance & Funding. The Treasurer Test also assesses your personality profile with a test based on the scientifically-acknowledged Big Five theory.
How do I prepare for the Treasurer Test?
We recommend to make the test in a quiet room where you will not be disturbed. Don’t be afraid when you can’t complete all questions. There are more questions than you can answer in the time that’s available. If you don’t know the answer on a question, move on to the next. There are several things that will be measured such as speed, productivity and accuracy. See a summary of our preparation advice here.
What tools do I need for the Treasurer Test?
Laptop/Computer, internet, scientific calculator, pen and paper.
RESULTS
How are the results measured?
Your corporate treasury technical knowledge level score is based on the type of questions answered correctly. Each category contains 30 questions with a time limit of 10 minutes. It is not expected that you will answer all the questions within the allowed time. There are 4 categories in total.
The question structure is build with the method ‘easy’ to ‘complex’. The more complex questions are rated with a higher score. Therefore, speed in combination with correct answers will result in a higher score. Your score will be presented as an absolute number and also will be compared with a reference group based upon the length of relevant treasury experience.
Your psychological preferences are scored on a stanine scale. A stanine scale is a way of presenting the area of normal distribution of your results compared with the ‘general population’ and all other treasury testees (not related to the number of years of experience).
How are the results presented?
Per knowledge subject you will get a benchmarked score on how many questions you answered correctly of the total available answers in that category. Besides your score, we will show how many questions you made and how many of those you answered correctly. The personality profile is measured through assessing your natural inclination towards certain personality aspects. The report shows your benchmarked score on a stanine scale.
Who can see my results?
Treasurer Test results are only downloadable by the person who has taken the test. This means that If you paid and registered for the test you will be able to download the Treasurer Test report directly. If your (potential) employer or training institute paid for the test, you can forward the report by email. Please note that testees are not obliged to share their test results with a paying third party. At the end of the test they can choose whether or not to disclose the report to the paying third party. This reflect the latest changes in data protection law.
How do you combat fraud?
Suspicious accounts and the highest 20 percent of scores are randomly investigated, amongst other ways by using video-based retesting. If suspicions are not countered, the account will be blocked.
REGISTRATION
How do I take the Treasurer Test?
You should register, agree to the Treasurer Test terms of use and privacy statement, and pay for the test. Subsequently, an entry code will be emailed to you. With this code you can log into your account and take the Treasurer Test.
When and where do I take the Treasurer Test?
The Treasurer Test is an online test. This means you can take the Treasurer Test anywhere and anytime in the world.
How much does it cost to take the Treasurer Test?
The Treasurer Test costs € 595,- (ex VAT). You can pay online with a credit card, debit card, PayPal or iDEAL.
What happens with my personal information?
Your personal information is stored for one year. One year after taking the test, personally identifiable information (PII) such as your name and email address, will be deleted from our database. This means that your results are anonymized and only used for benchmarking purposes.
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