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Forecasting Through Disruption
11-05-2022 | treasuryXL | Cashforce | LinkedIn |
Despite the disruption to customer behaviour brought by the Covid-19 crisis, Pearson developed a consolidated forecasting process that has enabled it to speed up invoicing, accelerate £60m in cash flow and meet its 2020 targets.
Source
Cash flow forecasting has long been recognised as a major challenge for corporations – and learning company Pearson, which has over 20,000 employees and reported sales of £3.4 billion in 2020, is no exception. “One of the challenges with forecasting is to understand what your assumptions are when producing the forecast,” explains Group Treasurer James Kelly. “When you’ve got lots of people producing forecasts independently, and then consolidating them, you need to have a consistent approach.”
Getting people to produce a forecast on time can be difficult, while treasury teams often spend precious time pursuing clerical accuracy. And as Kelly adds, “it is important to have enough detail in your actuals to really understand whether the hypotheses that were ventured in your forecast have actually come to pass.”
Forecasting during a pandemic
The latter is particularly important in times of uncertainty – and few things are as unpredictable as the onset of the Covid-19 pandemic. For many organisations, the crisis meant that cash flow forecasting became significantly more challenging overnight, not least because disrupted customer behaviour meant that forecasts based on historical sales patterns could no longer be relied upon.
For Pearson, with the company’s professional test centres forced to close due to lockdowns, a major challenge came in the form of refunds that had to be issued to customers for tests that had been booked in advance – a situation that was complicated by the differing ways that customers could respond. Some rebooked straight away; some requested an immediate refund, and others waited for a couple of weeks before requesting a refund. And when requesting a refund, customers could either apply to Pearson directly, or request a refund via their credit card companies. All these different scenarios impacted the company’s short-term modelling.
The path to better forecasting
While the challenges were considerable, Pearson’s treasury had already been on a journey to more effective forecasting before the pandemic began – indeed, the automation of cash forecasting formed part of a treasury and cash management optimisation project that won a EuroFinance Treasury Excellence Award in 2019. The company subsequently adopted Cashforce’s AI-powered forecasting system, and continued to work on improving its processes. However, when the pandemic started it was clear that a more comprehensive approach was needed.
“What was interesting about Covid was that some of the basic models that we built around predictable cash flows broke,” Kelly comments. “We were able to keep using some of our models for things like payroll – but on the receipt side, a lot of things that had previously been predictable now became unpredictable.” What this meant was that the forecasting ability of the system almost became redundant – “and the benefits of the solution became more about hypothesis testing, and as a consolidation engine that allows you to build different scenarios.”
With the onset of the pandemic, each business produced a high, medium and low sales forecast, which the treasury team used to build its own set of forecasts. While this exercise was initially carried out using Excel, the treasury’s Cashforce-based 12-week forecast demonstrated good levels of accuracy, as well as integrating with key group systems. As such, the system was selected as the basis for the new approach to producing short, medium and long-term forecasts in 16 categories, later expanded to include 120 subcategories.
Building a map of cash flows
Pearson’s functional currency is GBP, so with considerable variability in the company’s US profits another question was how to use the forecasting information to hedge currency risk. Again, this drew upon the low, medium and high scenarios: forward contracts were used to hedge committed or highly probable foreign currency flows for the low scenario, with collars and options used to provide protection for the medium and high scenarios.
Benefits of the project
Pearson has seen numerous benefits as a result of its enhanced forecasting process. Preparing forecasts centrally has freed up significant time for the operating companies, as well as enabling forecasts to be updated daily, instead of weekly or monthly. And Kelly notes that forecasts are now significantly more accurate than they were in 2019, despite uncertainty relating to the pandemic.
Further, Pearson has been able to use insights from the forecasting process to drive better performance in its working capital metrics – in particular, lower DSO, lower variability in DSO, and faster invoicing speed. These initiatives accelerated over £60m of cash flow in 2020, enabling Pearson to achieve its objective of delivering operating cash flow of over £300m, despite the pandemic.
Above all, the crisis has acted as a catalyst for Pearson to rethink the nature and purpose of forecasting. As Kelly concludes: “Whether the forecast is right or wrong becomes less important than understanding why it’s right or wrong. So the game we were playing wasn’t to get the forecast right on any particular day, but to have a good understanding of the business over time – which then enables you to get it right.”
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GTreasury Announces Deal with Moody’s Analytics to Provide Customers with Asset and Liability Management (ALM) Capabilities
10-05-2022 | treasuryXL | Gtreasury | LinkedIn |
Continuing to modernize its digital treasury and risk management ecosystem with strategic partnerships, GTreasury now offers platform interoperability and data integration with Moody’s Analytics’ ALM SaaS product
Source: Gtreasury
CHICAGO, Ill. – May 10, 2022 – GTreasury, a treasury and risk management platform provider, today announced a collaboration with Moody’s Analytics, a global provider of analytic tools and risk assessment capabilities, to enable customers to seamlessly leverage Moody’s Analytics’ market-leading asset and liability management (ALM) SaaS product. Moody’s Analytics’ ALM SaaS product is now available as an interoperable and integrated component within GTreasury’s continuously modernizing software-as-a-service ecosystem for treasury and finance teams.
As small and medium-sized financial institutions grow, accumulated data reaches volume and complexity beyond what manual spreadsheets or outdated software can reliably or efficiently handle. These legacy approaches place increasing strain on internal staff – especially when accelerating growth puts financial institutions within the purview of new regulatory reporting requirements. Banks, credit unions, and other institutions in this position must implement automated capabilities that remove the burdens of routine ALM tasks and monitor and manage their risk far more effectively and completely.
Moody’s Analytics’ ALM SaaS product leads the industry in meeting these requirements, offering a seamless enterprise platform that integrates ALM, liquidity risk management, funds transfer pricing, and regulatory reporting capabilities. Institutions leveraging the product can fully integrate ALM into their business management and regulatory compliance processes, optimizing capital distribution to achieve strategic benchmarks. The product eases the management of even the most complex ALM tasks, while also providing a foundation for defining client behavioral models and forecasts, and delivering data-backed insights that drive key business decisions.
“Moody’s Analytics offers the most comprehensive and capable ALM product on the market today,” said Terry Beadle, Global Head of Corporate Development at GTreasury. “Small and mid-sized financial institutions struggling under the burden of their asset and liability management duties, especially from a regulatory compliance perspective, are instantly and significantly empowered by the automation and powerful tooling Moody’s Analytics’ ALM SaaS product puts at their command. We’re excited to introduce the many benefits of Moody’s Analytics’ offering to our customers as an interoperable, fully data-integrated, market-leading component of the GTreasury ecosystem.”
With Moody’s Analytics’ ALM SaaS product now available as another component within GTreasury’s ecosystem, customers can easily integrate their data and begin to harness the ALM solution across their treasury and risk management practices.
“Pairing GTreasury’s treasury and risk management system and our own leading ALM SaaS product is an advantageous strategy for firms optimizing performance and streamlining operations,” said Cayetano Gea-Carrasco, Managing Director at Moody’s Analytics. “We’re proud to work with GTreasury to help customers to realize their efficiency goals, and to make more informed and accurate business management decisions based on this seamless data.”
About GTreasury
GTreasury is committed to connecting treasury and digital finance operations by providing a world-class SaaS treasury and risk management system and integrated ecosystem where cash, debt, investments and exposures are seamlessly managed within the office of the CFO. GTreasury delivers intelligent insights, while connecting financial value chains and extending workflows to third-party systems, exchanges, portals and services. Headquartered in Chicago, with locations serving EMEA (London) and APAC (Sydney and Manila), GTreasury’s global community includes more than 800 customers and 30+ industries reaching 160+ countries worldwide.
About Moody’s Analytics
Moody’s Analytics provides financial intelligence and analytical tools to help business leaders make better, faster decisions. Our deep risk expertise, expansive information resources, and innovative application of technology help our clients confidently navigate an evolving marketplace. We are known for our industry-leading and award-winning solutions, made up of research, data, software, and professional services, assembled to deliver a seamless customer experience. We create confidence in thousands of organizations worldwide, with our commitment to excellence, open mindset approach, and focus on meeting customer needs.
REMINDER | Webinar | How successful master data management can help you secure financial processes? May 18th
10-05-2022 | treasuryXL | Nomentia | LinkedIn |
Find out how to manage your Master Data in a safe way including how to prevent fraud in this upcoming webinar next week on May 18 together with Nomentia, featuring Mark Roelands, Kendra Keydeniers and Huub Wevers!
Date & time: May 18, 2022 at 14:00-14:45 PM CET | Duration 45 minutes
In this webinar, we’ll discuss how you can manage your Master data in a safe way, how you can prevent fraud and sanction risks through the management of this data, and the subsequent processes that make use of your master data. This ranges from the creation of counterparties in your ERP to the safeguard checks in your payment process and system.
More specifically, we will discuss the following topics:
Throughout the webinar, you get a chance to ask any questions that arise.
Click here to register now!
Meet the speakers
Mark Roelands
Risk and Compliance Specialist
GRC Consulting
Kendra Keydeniers
Director Community & Partners
TreasuryXL
Huub Wevers
Head of Sales
Nomentia