The top 5 most read articles at treasuryXL of 2019

| 31-12-2019 | treasuryXL | Kendra Keydeniers

Here we are, the last day of 2019 and counting down to a new year. treasuryXL publish treasury related articles each day except during public holidays and weekends. For all treasury gurus that are counting right now while reading this, indeed….this year we published 253 articles.

Looking back and see what articles belong to the top 5 most read articles is a nice thing to do. What do people like to read? What treasury topic do they like?

Here are the top 5 most read articles of 2019:

 

  1. Best Practices Bank Account Management

    by TIS

  2. How does a FX spot transaction work?

    By Lionel Pavey

  3. Cash Pooling, where is the money?

    by Francois De Witte

  4. Managing treasury risk operational risk part VII

    By Lionel Pavey

  5. Basis swap convert exposure

    by treasuryXL

 

As you can see the top 5 articles have been published in the years before 2019. Does this mean treasuryXL attracted less visitors than previous years? No, that’s not the case, we even doubled the amount of visitors this year. It all depends on google ranking. Google has over 200 algorithm ranking factors that are important for the content of an article. That’s why historical optimization is more important than ever before. Historical optimization means optimizing your “old” blog content so it’s fresh, up-to-date, and has the ability to generate even more traffic and conversions than it already does. By “old,” I just mean articles that already exist on the treasuryXL website — whether you wrote them last month or three years ago.

In 2020 we will work on historical optimization and of course publish new articles.

Do you want to write a treasury related article and publish it on our website? Why wait! You can contact me anytime and discuss all the options. Visit the ‘become an expert’ page for more information.

Now it’s time to pop the champagne! Let 2020 begin…

 

Kendra Keydeniers

Community & Partner Manager treasuryXL

Reminder for registration for the Masterclasses Treasury Management 2020

| 30-12-2019 | treasuryXL | Hogeschool Utrecht

The HU University of Applied Sciences in Utrecht scheduled 4 Post-HBO Treasury Management Masterclasses in 2020. The first masterclass will start on April 16, 2020. You can find all information below (in Dutch).

Bent u een controller, accountant, financieel adviseur, cash manager of bankier met enkele jaren ervaring en ambieert u op termijn een functie als financieel directeur van een grotere (internationale) MKB onderneming of non-profit organisatie? Of wilt u gewoon meer kennis opdoen over Treasury Management (TM) om dit binnen uw eigen werkgebied toe te passen, dan is de Post-HBO Leergang TM iets voor u. Gedurende een viertal masterclasses verdiept u zich in de belangrijkste onderdelen van TM, zoals corporate finance, cash management, valuta en rentemanagement

De cursus wordt afgesloten met een opdracht uit de eigen praktijk van de deelnemer die gepresenteerd en beoordeeld wordt. Naast de bedrijfsopdrachten van de cursisten zelf maakt ook een treasury simulatie op het gebied van cash management onderdeel uit van het programma.

Tijdens de leergang komen vele praktische vraagstukken aan de orde, zoals:

  • Bankrelatiemanagement: opbouwen en onderhouden van een goede relatie met de bank.
  • Alternatieve financieringsmodellen: SME bonds, Crowdfunding, Blockchain, Impact Investing.
  • Rentederivaten: niet alleen woningcorporaties hadden een probleem.
  • Dé manier om debiteuren (sneller) te innen: international cash management.
  • Een transparante rapportage: inzicht bieden voor alle stakeholders.
  • Internationaal zakendoen: forex risico en -hedging, investeringen met rendement.
  • Behavioral finance: inzicht krijgen in hoe financiële beslissingen worden beïnvloed door biases en wat daaraan te doen.

De masterclasses (met ook Engelstalige literatuur) vinden plaats op donderdagen in april, mei, juni en oktober 2020.

De opleiding bestaat uit de volgende onderdelen:

  1. Corporate Finance (Frans Boumans)
  • Hoe wordt een onderneming gefinancierd?
  • Nieuwe financieringsvormen (crowdfunding, private equity, peer-to-peer lending, fintech)
  • Overname- en buy out financiering
  • Het belang van Investor Relations
  • Hou houd je de relatie met de bank goed?
  1. Cash management (Michiel van der Ven)
  • Het opzetten en forecasten van cash budgets
  • Ins en outs van credit management
  • (international) betalingsverkeer
  • Netting en cash pooling
  1. FX-, interest rate risk management (Annette Prinsen)
  • Financial risk strategie en policy
  • Vreemde valuta- en rente riskmanagement (hedging instrumenten)
  • Investeringen van overtollige liquiditeiten
  • Pensioenverplichtingen
  1. Consultancy assignment and personal development (Frans Boumans en Janneke Nonkes)
  • Presentatie en feedback op een eigen praktijkonderzoek over een treasury naar eigen keuze
  • personal development gesprek

De docenten zijn allen langdurig in het bedrijfsleven werkzaam (geweest) als financieel directeur, treasurer en bankier en hebben tevens ruime ervaring in het hoger onderwijs.

Data: donderdagen 16 april, 14 mei, 18 juni  en 15 oktober 2020, van 15.30u tot 20.00u van 15.30u tot 20.00u, kort onderbroken voor een lichte maaltijd, in Utrecht.

Prijs: € 1975 (inclusief persoonlijk assessment)

Locatie: Hogeschool Utrecht, Heidelberglaan 15, Uithof, Utrecht

Toelatingseisen: HBO-diploma, ca. drie jaar relevante werkervaring

Tijdens een adviesgesprek kijken we samen of de opleiding aansluit bij uw ambitie én of u past bij de opleiding. Door de interactieve colleges leer je van elkaar, dus de samenstelling van de groep is van belang. Gestreefd wordt naar een diverse groep deelnemers verschillende sectoren van het bedrijfsleven en de non-profit sector.

More info and registration here

 

Digitalization enhances the strategic position of the treasurer

| 27-12-2019 | TIS | treasuryXL

Discover how you can skillfully use digitalization to play a greater strategic role in your company.

Digitalization is changing the business model of every company. In this factsheet, you will gain valuable expert insights on how you can use digitalization to enhance your strategic position. You will also learn why the opportunities of digitalization do not by any means poses a threat. Read more about:

  1. Digitalization as a horizontal phenomenon
  2. Data is the treasurer’s new gold
  3. Being a sparring partner for the CEO

New technologies are coming to the fore, which redefine the payment area. Especially treasurers will benefit from the expert insights. Do not miss this beneficial factsheet!

Request your download here.

The treasuryXL team wishes you a Merry Christmas!

| 25-12-2019 | treasuryXL |

We wish you a Merry Christmas!

Enjoy your time with loved ones.

Cheers!

My Currency Fundamentals for SMEs

| 24-12-2019 | by Pieter de Kiewit |

My Very Practical Currency Fundamentals for SMEs

In 2016 I informed you about my baby steps in dealing with foreign exchange exposure in a “baby steps article” on this platform. I was about to receive Euros from Switzerland and had to pay in GBP (British pounds) into the UK. Two things I learned about the fees of big banks if you transfer internationally into another currency:

  1. There is a transaction fee if you transfer money into another currency, in most cases a flat fee;
  2. The bank takes a percentage from the total amount to make GBP out of Euro.

My solution at the time was to open a GBP account to avoid both these costs. There is a monthly fee for this bank account and some simple math showed that was the way to go. Currently GBP is relatively strong and I do not expect any UK assignments shortly, so I have decided to close down the account. Time to dig in again. I have struggled with three major considerations.

Transferring GBP into Euro: struggling with the spread

If you go onto the internet to find out what the current exchange rate between two currencies is, you get a number like 1 GBP equals 1.20 Euro. So far so good. Banks and other financial services providers work with a so-called spread. They deserve a reward for their services so the price they pay for your GBP is lower than the price you pay them if  you buy a pound from them. The spread is the percentage over and under the number you will find on the internet.

I am not here to endorse any businesses but I can tell you that the percentages can differ substantially. One provider asked 0.7%, the second 0.3%. The second provider does not charge a transaction fee, the first one does. If the amounts are substantial and your margins are thin, this difference can be substantially!

The hassle

When I choose for the second provider, I have to open a new account, remember new passwords, hand in documentation and think about if I can trust them. In short: a hassle.

With my first provider I have relationship of decades. I decided to ask them if there would be a chance that they would lower their prices. As I am a small business owner, I do not have a contact person anymore. I sent three emails to three different mail addresses. The first was not answered, the second was answered with “I cannot help you” and upon mail number three I received a call. The service agent mentioned she could not help me but I should call a colleague at 3:30 pm and then I would be put in the waiting line. Call me old-fashioned but that is not how I want to work. So that is what I told her. I noticed she really wanted to help but at the end of the day I got the message that my transaction was not in the millions so I would not receive an answer and there was no price-lowering. Ok.

I am not a fan of bank bashing and think they do important work. And we do not want to pick up every recruitment assignment. It is not in our interest but also not in the interest of the potential client. I would have appreciated a better line of communication.

The Market

As you might have noticed, I do like my cost savings but let’s be practical. This year the conversion rate GBP – Euro has been at its’ lowest at 1.06 and at its’ highest at 1.20. So there is  a difference of 0.14. The difference in the conversion rate has been 0.4%. I now chose to invest time in how to do the conversion and with which provider. Market study, good timing and luck are much better ways to optimize your returns.

Final remarks

If you, as an entrepreneur, have to deal with foreign exchange rates it is good to know how the cost structures of banks are. Also it is good to know there are alternative service providers like XE, Ebury, NBWM and Global Reach Group. If your time is limited and the number of transactions low, dig in once and decide what works for you. If you have regular and/or substantial transactions, it makes sense to keep the topic on the agenda. In that case it might be useful to gather further information and consider risk mitigating strategies and learn more about hedging, derivatives, spots, forwards, et cetera. If you want to, I can open my network for you.

Good luck and I would like to read about your experiences,

 

 

Pieter de Kiewit
Owner Treasurer Search

 

Recap of the SCF Forum and Awards event 2019

| 23-12-2019 | by treasuryXL |

On the 28th November 2019, treasuryXL attended the SCF forum Europe 2019 in Amsterdam – an annual event. Here is our review of the day.

So, what is Supply Chain Finance (SCF)?

It is a series of processes, both financial and technological, designed to improve business efficiency and reduce financing costs by providing bespoke short-term funding solutions for both buyers and sellers, with a view to improving and enhancing working capital and liquidity for both buyers and suppliers.

There are three parties involved – buyers, suppliers and financial providers. Traditionally, banks acted as the provider of funding but, with the advent of fintech other non-bank firms are also offering solutions.

The ultimate purpose of SCF is to improve the cashflows for both buyers and suppliers.

Participants included banks, fintech, academia, together with companies that use SCF solutions such as DFDS, Airbus and Jumbo supermarkets.

The forum started off outlining the major themes surrounding SCF that needed to be considered:

  • Data collection and analysis
  • Education
  • Financial Flows
  • Procurement
  • Logistics – the missing link
  • Inclusiveness
  • Sustainability

Time was given to highlighting the awareness needed to form a true collaboration with all participants – intra firm, inter firm as well as the supply chain itself. No one department can successfully implement SCF on their own – it requires the input from a wide range of departments.

Rabobank gave a talk about trade and its impact on poverty. Between 1900 and 1950 Europe and the USA moved ahead, economically, from the Far East and Africa. Since the financial crisis of 2008 the middle ground of Europe and the USA has been squeezed and whilst poverty has decreased worldwide, the levels of inequality between income and wealth had risen back to the levels of the 1920’s.

Whilst trade tariffs are on their way down, trade barriers have been rising.

Politically the near future is likely to bring about new confrontations on world trade:

  • USA – China
  • Brexit
  • Capital controls to counter tariffs
  • Restrictions on foreign ownership

DFDS – case study

DFDS are a Danish shipping and logistics company, focusing also on ferries and door-to-door solutions. From an environmental view they have big concerns about the impact of logistics on world climate. Their aim for the future is to be smarter, cheaper and to have less impact on the environment. On the logistics side they must be more cost efficient as they operate in a market with small margins and large competitors.

As data has grown exponentially, they have embarked on an extensive SCF programme that has seen their return on invested capital improve from 5% in 2012 to 19% in 2017.

Major challenges are still to be faced – especially because of Brexit as 45% of their business goes through the UK. Hauliers in the UK are especially worried. This sector of the industry is best suited to younger truck drivers (there is a 73% satisfaction rating amongst drivers between 18-24 year olds), but problems are evident in the lack of female drivers and an average age for drivers of 50 years old and rising all the time.

DFDS strives to help hauliers via SCF by paying early with discounts. This had led to both an improvement in working capital fo DFDS as well as hauliers – one was able to purchase 10 extra trucks by being paid early.

Jumbo – case study

Jumbo is the second largest supermarket chain in the Netherlands with a 21.6% market share. Their growth in turnover has been impressive – from EUR 120m in 1996 to EUR 8.5bn in 2019. There is a strong impetus to manage the needs of both the suppliers and the company. Whilst Jumbo has grown rapidly a lot of their small suppliers had trouble keeping pace especially with the terms and conditions that existed before the implementation of SCF solutions. As and when Jumbo grows, their suppliers need to follow and 80% of their suppliers are defined as SME (Small and Medium Enterprises).

Jumbo has implemented a variety of different solutions to meet the needs of their suppliers, such as reverse factoring, dynamic discounting etc. It was important for Jumbo that the suppliers got on board with the programme – they have more than 1000 small suppliers. There was a 63% pickup in the first few months.

Moodys – word of warning

One of the main instruments used in SCF is reverse factoring, which differs markedly from traditional factoring. Reverse factoring is initiated by the ordering party – the buyer. As they are normally the larger party to an agreement their credit standing is of a higher order than the supplier – hence their interest costs are lower than for the supplier. With reverse factoring suppliers get paid early and buyers can delay payment to the factor (financial counterparty). However, the liability rests with the buyer.

Whilst it is increasing in popularity as a source of financing it can lead to a weakening of liquidity. Rating agencies are grappling with the legal consequences and lack of disclosure of reverse factoring. Now there is no legal requirement to disclose how much reverse factoring is on the books. This can lead to an incorrect picture of the financial health of a company. Companies that embraced Reverse Factoring but eventually suffered as result include Carillion, Abengoa and Distribuidora International de Alimentacion.

Big Data and AI

With the advent of ever more computing power it has become possible to analyse increasing amounts of data. This will lead to big changes in SCF through the use of Artificial Intelligence such as:

  • Traditional SCF
  • Fintech solutions
  • AI powered SCF solutions
  • Blockchain and Internet of Things

However, whilst embracing technology solutions we must not lose sight of old axioms such as “garbage in is garbage out”. It will be necessary to truly understand the flow of data, the variables and the output. Modern history has plenty of examples of large sources of data and experts, leading to losses and mistakes as well as profits and rewards.

Conclusions

  • A truly collaborative arrangement both internally and externally
  • Greater understanding of the business drivers
  • Improved early payment for suppliers
  • Chance to delay payments for buyers
  • Mutual transfer of knowledge and requirements for both parties
  • Improved relationships
  • Need to onboard all relevant departments

The opening quote at the forum was “Bridging physical and financial supply chains”. The one area that I, personally, felt was missing was the impact on the circular economy. Whilst there was talk on sustainability and global climate, I wished to hear more about how to increase the effective use of assets – trucks going to clients full and then returning empty, etc.

Maybe that can be a “hot item” for next year’s forum.

 

 

 

Lionel Pavey

Cash Management and Treasury Specialist

 

The 2019 timeline of treasuryXL: It has been a wonderful year!

| 20-12-2019 | by treasuryXL |

treasuryXL started its’ community in 2016. treasuryXL is a community platform for everyone who is active in the world of treasury and build by a network of highly valued partners and treasury experts who bring the treasury function to a higher level.

treasuryXL keeps its’ community up-to-date with daily treasury news/blogs, events, vacancies that are published on the website and on social media. At the end of the week, just before the weekend starts, everyone who is subscribed to the free treasuryXL newsletter receives a recap of the week.

At the end of 2018 we decided to do things differently. We started a search to find a new Community and Partner Manager. At the end of April we embraced our new Community & Partner Manager, Kendra Keydeniers, who decided to evaluate the foundation of the treasuryXL platform and enhance it from there. This resulted into some major changes that are reflected on our website, social media and partner network.

We will take you with us through our 2019 timeline, let’s go:

Our timeline shows you that we never sit still and continue building. The changes in 2019 also resulted in an impressive community increase of followers on social media, website visits and newsletter subscribers. We doubled the number of newsletter subscribers, tripled the number of followers on LinkedIn and our website visits increased over 50%. In 2020 we will continue to improve the quality of our community. You will hear a lot about projects like ‘Rent a Treasurer’, the Treasurer Test, Partner & Expert round tables and more. Let us surprise you in 2020!

Thanks for being part of the treasury community. We are always striving to improve and increase our community, so keep in mind that we love to hear ideas, feedback and other opportunities within the World of Treasury.

Wishing you a great holiday season and let’s make 2020 a year not to forget!

Cheers,

Team treasuryXL

Possible Amendments to the Withdrawal Bill see Pound Fall Sharply

| 19-12-2019 | treasuryXL | XE |

Boris Johnson will bring his Brexit bill before a new intake of MPs this week without some of concessions he made before the election. The Withdrawal Agreement Bill – the key legislation that will pave the way for the UK to leave the European Union on 31 January 2020 – is expected to come before the Commons on Friday.

Under Johnson’s plan Britain is to leave the EU on 31 January once the bill passes, at which point the transition phase with the EU kicks in. During this period, the UK is expected to leave the customs union and single market and enter new negotiated arrangements, but will follow most EU law like other member states. However, it will not have voting rights like other member states.

News on the morning of the 17th has suggested that the Brexit bill is thought to have been rewritten since the one that was backed at the second reading by the previous Parliament. The Conservatives now  have a majority of 80 which means that Johnson is unlikely to bring forward concessions to his Brexit bill that he suggested he would consider at the time. Those include clause 30, allowing MPs to vote on an extension to the transition period beyond 2020 if a free trade deal was not struck in time.

With the new legislation looking to legally prevent delaying a departure beyond 2020 there is a risk that leaving with no deal is back on the table. This new amendment has seen the Pound drop over 1% against the dollar and the Euro. We are now back to the levels we were trading at before the election, with GBPUSD down from 1.35 on Friday to 1.3190 and GBPEUR down to 1.1846 from 1.20+ last week.

It is a fairly data heavy day today with UK average earnings, ILO employment data and Mark Carney speaking which could continue to see volatility in the Pound.

GBPUSD– 1.3190

GBPEUR– 1.1857

EURUSD– 1.1134

The figures are based on the live mid-market rate, correct as of 09:00 GMT on 17/12//2019, and are provided for indicative purposes only. Live mid-market rates are not available to consumers and are for informational purposes only. The rates XE quotes for money transfer can be selected via the page on XE’s website ‘Live Money Transfer rates’.

Get in touch with XE.com

About XE.com

XE can help safeguard your profit margins and improve cashflow through quantifying the FX risk you face and implementing unique strategies to mitigate it. XE Business Solutions provides a comprehensive range of currency services and products to help businesses access competitive rates with greater control.

Deciding when to make an international payment and at what rate can be critical. XE Business Solutions work with businesses to protect bottom-line from exchange rate fluctuations, while the currency experts and risk management specialists act as eyes and ears in the market to protect your profits from the world’s volatile currency markets.

Your company money is safe with XE, their NASDAQ listed parent company, Euronet Worldwide Inc., has a multibillion-dollar market capitalization, and an investment grade credit rating. With offices in the UK, Canada, Europe, APAC and North America they have a truly global coverage.

Are you curious to know more about XE?
Maurits Houthoff, senior business development manager at XE.com, is always in for a cup of coffee, mail or call to provide you detailed information.

 

 

Visit XE.com

Visit XE partner page

treasuryXL announces partnership with XE.com

| 12-12-2019 | treasuryXL | XE |

treasuryXL announces partnership with XE.com, The World’s Trusted Currency Authority and provider of currency data, FX Risk Management and Technology solutions for businesses

VENLO, The Netherlands, DECEMBER 12, 2019 – treasuryXL, the community platform for everyone who is active in the world of treasury, today announced the premium partnership with the world’s most trusted currency authority XE.com.

XE.com is the first major currency specialist to work with treasuryXL. As a marketplace, treasuryXL will offer XE.com market commentary and insight to her audience. Offering a continuous flow of relevant treasury content, making treasury knowledge available, results in treasuryXL being the obvious go-to platform for its’ audience. The partnership kicks off with the new ‘Treasury Topic’ environment where XE.com will have a prominent role in the FX, risk management, payments and FinTech environment.

XE.com is the world’s most popular foreign exchange website, and a leading global destination for foreign exchange rate tools and data. XE Business Solutions support companies across the world with robust responses to unpredictable currency markets; whether they rely on XE for information about currency markets, seek support when managing their FX risk, or trust them with business-critical international payments.

treasuryXL and XE.com strive for a fruitful partnership where its’ audience are top of mind making sure that (potential) clients are always up to date with the latest global currency news and benefit from a comprehensive range of currency services and products. XE Business Solutions and currency expertise provide companies with robust responses to unpredictable currency markets, so that bottom line is protected by currency risk and not impacted by it.

About treasuryXL

treasuryXL started in 2016 as a community platform for everyone who is active in the world of treasury. Their extensive and highly qualified network consists out of experienced and aspiring treasurers. treasuryXL keeps their network updated with daily news, events and the latest treasury vacancies.

treasuryXL brings the treasury function to a higher level, both for the inner circle: corporate treasurers, bankers & consultants, as well as others that might benefit: CFO’s, business owners, other people from the CFO Team and educators.

treasuryXL offers:

  • professionals the chance to publish their expertise, opinions, success stories, distribute these and stimulate dialogue.
  • a labour market platform by creating an overview of vacancies, events and treasury education.
  • a variety of consultancy services in collaboration with qualified treasurers.
  • a broad network of highly valued partners and experts.

About XE.com

XE can help safeguard your profit margins and improve cashflow through quantifying the FX risk you face and implementing unique strategies to mitigate it. XE Business Solutions provides a comprehensive range of currency services and products to help businesses access competitive rates with greater control.

Deciding when to make an international payment and at what rate can be critical. XE Business Solutions work with businesses to protect bottom-line from exchange rate fluctuations, while the currency experts and risk management specialists act as eyes and ears in the market to protect your profits from the world’s volatile currency markets.

Your company money is safe with XE, their NASDAQ listed parent company, Euronet Worldwide Inc., has a multibillion-dollar market capitalization, and an investment grade credit rating. With offices in the UK, Canada, Europe, APAC and North America they have a truly global coverage.

Are you curious to know more about XE?
Maurits Houthoff, senior business development manager at XE.com, is always in for a cup of coffee, mail or call to provide you detailed information.

 

 

Visit XE.com

Visit XE partner page

How to generate an accurate cashflow forecast | 3 key factors

| 10-12-2019 | treasuryXL | Cashforce |

One would imagine that in a world where smart cities and virtual reality are becoming a part of daily reality, treasury and finance departments would have perfected their cash forecasting by now, giving the CFO a level of confidence in the numbers. Surprisingly, that doesn’t appear to be the case at all – both PwC’s & Deloitte’s Global Benchmarking studies highlighted cash and liquidity risk as the most important treasury challenge to manage.

If you look closer, it’s not difficult to see why: try managing and forecasting the cash flows of a complex internal ecosystem of multiple ERP’s, FX exposure and geographic entities, combined with increased global uncertainty, tax changes, interest rate rises, and regulatory change. Still, having an accurate cash flow forecast and understanding the underlying drivers is essential to a company’s well-being, as it can help you foresee potential problems which may arise in the year ahead. A lot of companies around the world are therefore increasing their efforts when it comes to cash flow forecasting, but with variable results and accuracy.

So what sets good cash forecasting (i.e. accurate and efficient forecasting) apart from bad cash forecasting (i.e. not transparent, inaccurate & time-consuming cash forecasting)?

KEY SUCCESS FACTOR #1: BEING ABLE TO DRILL DOWN INTO YOUR ACTUAL CASH FLOW DRIVERS BY USING TRANSACTION-LEVEL / GRANULAR DATA

A lot of Corporate Treasurers are seeking an accurate cash forecast through a delicate combination of well-chosen cash flow drivers & assumptions. But, to what extent do they have a good view of these cash flow drivers? Do they know what is really eating and feeding their cash (more than the typical high-level AR, AP, Treasury flows that your Treasury Management System will consolidate)?

There isn’t a lot of visibility, unfortunately. Why is that? The classic TMS will typically consolidate basic forecasted flows from the different OpCo’s. The problem is that these OpCo’s cash forecasts are already consolidated from the underlying business transactions. This blurs the insight in the real cash flow drivers and gives no assurance whatsoever on the quality of the data.

To build a good forecast, it is important to have clear and error-free access to the underlying business transactions. In a recent PwC study, only 6% of respondents said they made use of the inputs at the transactional level. But thanks to advances in technology, particularly big data analytics, treasurers can have instant access to the details of the underlying cash movements and are given the ability to drill down to the transaction level. In the gif below, you can see what this means in practice.

Suppose you want to know exactly what drives your company’s cash flow in a certain period. The GIF below demonstrates how easy this could be, using the right platform. Via an easy-to-use click-through interface, the user is able to gain insights per month, quarter, week and day including instant access to the transaction level details.

KEY SUCCESS FACTOR # 2: APPLYING THE RIGHT FORECASTING LOGIC IS CRUCIAL FOR A GOOD FORECAST

Cash flow forecasting is often associated with a pile of Excel sheets and manual work. Treasurers are forced to turn to Excel to calculate their forecasts, because classic Treasury Management Systems do not offer the required flexibility.

Getting insights into all your OpCo’s cash flow drivers is one thing but combining all these data sources and applying the right logic/rules to generate a good forecast is another. Let’s take the example of applying vendor payment behavior. Intuitively, it makes sense to enrich invoicing & sales order details with data on when vendors actually pay.  Many companies, however, struggle to take this data into account. In general, they haven’t set up the appropriate algorithms to include in their forecasts. Hence, they face inaccurate forecasts and a lot of time is spent explaining (over and over again) why it was inaccurate.

Defining forecasting logic in a smart way is not an easy challenge. Yet, if your goal is to achieve an accurate forecast, a set of smart logic algorithms is invaluable. Again, modern technology proves to be a great asset. Progressive companies are using technology-driven, smart engines to calculate & automate their cash forecasts, taking over the manually intensive work and proposing logic that could improve the forecast in the future.

Above you can see how a smart engine works in practice. Cash flows are projected into the future (blue line) using forecasting logic. The dotted orange line represents a scenario with one or more of the underlying assumptions changed and immediately shows the impact relative to the blue line.

KEY SUCCESS FACTOR #3: A GOOD FORECAST IS ONE THAT IS USED TO DRIVE ACTION

Even if your forecast is no less than a piece of art, it might be underused, or not used at all. To make a real impact, there should be actions retrieved from the forecast results. There is a lot of potential in accurately predicting what might happen in the future and this potential should be translated into value.

There is even more value in considering multiple scenarios by changing some of the underlying assumptions (e.g. changing the day or frequency of your payment runs). When working in Excel or a TMS, changing assumptions might trigger a lot of additional manual work and is unfortunately often avoided. To get the most out of your forecasting process, it makes sense to build multiple forecasts and assess the impact of each of these scenarios on cash optimization. Driving action combined with building multiple scenarios, can transform finance departments into business partners for fueling a company’s growth.

The orange line reflects a scenario, built by the user. These views give her/him an immediate comparison between the current forecast (full blue line) and a different scenario (based on assumptions made by the user). A powerful simulation engine is able to show the impact of different scenarios in a blink. Imagine the power this can bring to a business-driven finance department.

Mark O’Toole heads up the Americas for Cashforce, a big data analytics & TMS technology provider focused on cash management, forecasting and working capital.