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Working with industry leading organisations, experts, governments and universities, BCR Publications delivers expertise in factoring, receivables and supply chain finance to a global audience.
BCR has long been a beacon of innovation and excellence in the realm of receivables finance, playing an instrumental role in shaping the industry’s international landscape. Through its comprehensive conferences, insightful publications, and thought leadership, BCR has facilitated crucial dialogues and connections among industry professionals, driving forward the development of receivables finance globally.
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Digital Treasury: Can it Tackle the Cash Forecasting Challenge?
01-05-2021 | Cashforce | treasuryXL |
Several decades ago, Excel was invented to process/model inputs and generate outputs. Today, it is still by far the most used technology to generate a cash flow forecast. However, as we strive to achieve better forecasting accuracy rates, our desire for automation and the seamless processing of FX hedges, liquidity borrowings and deposits have underlined the need for more effective modelling and increasingly powerful data processing.
The good news is that we’re at the forefront of that digital treasury revolution, or so-called ‘Treasury 4.0’. This means:
THE CASH FLOW FORECASTING CHALLENGE
Last year, multiple treasury surveys from sources including the Association for Financial Professionals, the UK Association of Corporate Treasurers, PwC and Citi, concluded that cash flow forecasting remains the primary challenge for treasurers today.
What are the headaches behind the process? Why is it so difficult for a corporate treasurer to generate an accurate cash flow forecast? And do we currently have the opportunity to solve this challenge?
The cash flow forecasting challenge consists of multiple underlying process complexities. The aim is to create an accurate cash flow forecast that helps us to make optimal FX and liquidity decisions.
What is accurate? You could write a book about cash forecast accuracy, since accuracy levels are totally different when comparing forecasts between different industries, time horizons, cash flow categories etc. When we forecast with a time horizon of five years, the accuracy levels are, of course, nowhere near as precise as when we forecast something just a few days in advance – and more reliable data is available. Depending on the goal, the treasurer will need a specific form of accuracy.
In addition, cash flow forecast data, together with the forecast assumptions/used models, need to come together in a well-coordinated process. Other challenges lie behind this process, including a disconnect between different data sources/systems such as enterprise resource planning (ERP) and treasury management systems.
Furthermore, there are myriad data-related issues to contend with including: concerns regarding data quality inside these multiple systems; the sheer volume of data to be processed; the need for granular and/or high-level data; and whether reliable external data can be found to be used to further improve the model.
Finally, aligning and coordinating forecasting assumptions between the different company departments is a time-consuming exercise. Imagine pulling all these assumptions from both HQ and local levels into an Excel model. No easy task.
FIG 1: THE CASH FLOW FORECASTING CHALLENGE
SO, WHAT HAS CHANGED?
Solving the cash flow forecasting challenge is easier said than done. Nevertheless, today treasurers can leverage several available technologies that, if used together intelligently, can tackle the described challenges head-on.
First, when we think about the goals and the accuracy levels that treasurers want to achieve, we can use different models to calculate those, such as accuracy heatmaps. Second, when we consider the data (ERP and non-ERP) required to run these cash flow forecasts, we can rely on big data engines, advanced extract, transform and load (ETL) processes, and application programming interface- (API) and non-API-based connectors that create an easy data flow into forecasting models. We have ways to analyse data quality as never before and we can set up a reliable work flow process to obtain assumptions from the decentralised business units all the way up to HQ level. This generates a cash flow forecast while keeping the granular detail.
Third – and we are only scratching the surface here – several machine learning models and algorithms are now at our disposal. These can be used to build and optimise cash flow forecasting models, so we can indeed solve the forecasting challenge in a reliable way.
Finally, armed with the right tools, the salient question is: what can we actually do with the cash forecast? We call it Cash Flow Forecasting 3.0: automating the decisions that are based upon the cash forecast (investing excess liquidity, performing a particular hedge, etc.) or the so-called post-forecasting decision-making engine.
By combining technologies we can not only automate manual and repetitive tasks, but effectively integrate the systemic data with human expertise and algorithmic trends from historic data. Add to this the use of recommendation engines and intelligent insights, and the interplay of data inputs can generate enriched decision support. Apparent visualisations and scenario analyses can offer a clear view of actionable results that treasury and management can use in their decision process. Reliable technology that enables people to make high-caliber decisions; this, we believe, is the true power of digital.
About Cashforce
Cashforce is a Cash Forecasting & Working Capital Analytics platform for corporates, focused on analytics, automation and integration. Cashforce connects the Treasury department with other finance / business departments by offering full transparency into its cash flow drivers, accurate & automated cash flow forecasting and treasury reporting. The platform is unique in its category because of the seamless integration with numerous ERPs & banking systems, the ability to drill down to transaction level details, and the intelligent AI-based simulation engine that enables multiple cash flow scenarios, forecasts & impact analysis.
Webinar: Trends for Treasury and Cash Management 2021
| 04-01-2021 | treasuryXL | Nomentia |
Treasury & Cash Management Trends 2021
A new year is just ahead of us. And what better way to start the year than to look at trends that will shape our business in the coming months.
Some of the trends derive from the global pandemic that is still showing its effect on the global economy and businesses around the world but other trends have been long brewing or just got further amplified.
Date, Time and Registration
Date: Thursday, January 14, 2021
Start: 13:00 CET / 14:00 EET
Duration: 45 minutes
Register: click here
Some of the topics Nomentia will cover
Who should attend:
Cash Managers, Treasurers, and Finance leaders working in international companies who are interested in understanding the landscape they are operating in and want to stay up-to-date with developments.
Meet the speakers
Jukka Sallinen
Deputy CEO, Nomentia
Jukka is a cash management domain expert with a strong hands-on background from international and complex payment factory and SWIFT projects. Previously, Jukka has been working in various R&D roles, focusing on bank and ERP integrations and security topics.
David Kelin
Owner, DNA Treasury Ltd
David Kelin possesses invaluable commercial experience gained from over 35 years working in leading organizations in the areas of liquidity, treasury, and cash management. He has a keen interest in treasury technology and has written many articles on the topic. David owns and manages DNA Treasury Ltd where he provides advice to corporates and banks on treasury and liquidity. He has worked with 100’s of companies. He also runs a treasury training company which has developed courses and trained over 1,000 treasury professionals over the years.
About Nomentia
Nomentia is a Nordic powerhouse for global cash management. We believe in a world in which businesses can make the right decisions no matter how unpredictable the times are. Our SaaS-based platform offers solutions for cash forecasting and visibility, global payments with bank connectivity, reconciliation, in-house banking, guarantees, and FX dealing. We serve 2,300+ clients in over 100 countries processing more than 200 billion euros annually. Cash is king!
Top 5 most read articles at treasuryXL.com and LinkedIn of 2020
31-12-2020 | treasuryXL | Kendra Keydeniers
The last day of 2020 is here. The whole world experienced a ‘year not to forget’. I can imagine that when you popped the champagne last year you had other thoughts and plans in mind for 2020.
To make sure you don’t miss out on the pieces that made the most impact this year, we sifted through the data to uncover the articles our readers loved most in 2020 on our website and LinkedIn. (Treasury Topic ‘What is’ articles excluded).
Top 5 treasuryXL website articles of 2020
Corporate Governance and Treasury | Embrace the Corporate Treasury Policy
by Francois De Witte
Top 5 most common pain points in Treasury
by Michael Ringeling
Corporates: Caveat IBOR!
by Daniel Pluta, Enigma Consulting
Exclusive interview with FX specialist Arnoud Doornbos about FX Risk Management
by treasuryXL, Arnoud Doornbos
How to simplify Procurement and Finance in the Supply Chain
by Wim Kok
Top 5 treasuryXL LinkedIn posts of 2020
Nomentia (former OpusCapita) makes Liquidity Management free for all customers!
by Nomentia
What is the difference between Treasury and Accounting?
by TreasuryXL
The missing part of a Treasury Job Description
by Aastha Tomar
An introduction to Forwards, Futures and Options Part 1
by Aastha Tomar
Partner Interview Series | The deeper dive with TIS (Treasury Intelligence Solutions)
by treasuryXL, TIS
Within two weeks we will post a full recap of 2020 with an overview of the partners and treasury experts that have joined us, together with some interesting treasuryXL facts!
Thank you for being part of the treasuryXL community. Now it’s time to pop the champagne! Let 2021 begin…
Director, Community & Partners treasuryXL