Overcoming Resistance | Integrating Data in Cash Flow Forecasting

| 17-05-2021 | treasuryXL | Cashforce |

Treasurers at mid-cap Corporates looking to use large-scale data analysis to enhance cash flow forecasting are finding colleagues hesitant.

The advantages of using sophisticated data analysis in cash flow forecasting are clear to a growing number of treasurers intent on improving accuracy and eliminating human error. But implementing and executing a data-driven approach often requires collaboration with teams outside treasury, such as AR and credit collections—and some NeuGroup members are meeting resistance.

• Solid support from leadership and showing the benefits of data analysis may make the transition smoother and help get members of other teams on board.
• That key insight emerged from a recent discussion at a meeting of NeuGroup for Mid-Cap Treasurers, sparked by a presentation about data-enhanced cash flow forecasting from Cashforce. Read an earlier article from Neugroup here.
• “A data mindset requires an analytical filter,” one member said, and if another team does not thrive on data, it takes some effort to get colleagues to buy in.

Overcoming intimidation. “I like to be very data-driven,” one member said. “Sometimes that doesn’t go over well in our company. It can be intimidating to people.”

• “When you start questioning trends, it doesn’t always make people feel very good,” she continued. “I think there can be a lot of defensiveness.”
• Another treasurer said that, in his experience, “having access to data and showing it to [staff] kind of scares them. People say they want to change—people don’t want to change.”
• Though there can be a learning and implementation period, he said he was able to find success by stressing how much time data analysis could save in the long run.

Navigating collaboration. Some members said teams that consistently set low expectations for cash flow are often obstacles to using data that produces different, more accurate forecasts. “There can be sandbagging in the forecast, people can be resistant to being more optimistic,” one member said.

• Another said that, though she would like to see the company implement a more data-focused model for cash flow, it would be too great a challenge to work with functions that don’t fit under the treasurer and do not share the data mindset.
• One treasurer said his company is having these issues with its AR team, which does not report to him. “When you compare quarters, [we are] 10-15% over our forecast,” he said. “There’s a disconnect.”

Teamwork, dream work. That member said he was able to work with his company’s AR team to incorporate data and effectively eliminate the issue, though there was initial reluctance.

• He recommends a single individual in a management role spearhead this kind of change. “If it is more driven by one leader, it is easier to shield criticism and make a right decision.”
• The member said another source of friction can be FP&A and other finance or business leaders outside of treasury who want to maintain oversight of forecasts.
• Though there is value in working together to incorporate data for forecasting, he said, “the entire organization needs to be ready to become more objective rather than try to manage divisions.”