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TRANSCRIPT
Agenda
1 2 3
4 5 6
Introductions Context for survey Survey results
Best practices for Cash Forecasting
Q&AConclusion
Introduction
Introduction
Context for Survey
Limitations of Cash Forecasting – Myth or Reality?
Time consuming
• Processing - Data collection/Data entering
• No time left for actual process (too many spreadsheets?)
Prone to human error
• One typo can make your whole forecast wrong
• Lack of proper review/No proper version control
Exposed to continuity & key man risk
• Having multiple people building your forecast, the risk of unrealistic forecasts will grow
• Numbers can get lost
Corporate Debt now 9.8Trn or 40% of net worth. Too high?
Too Much Debt – When forecasting becomes important
• Manufacturing (28%)• Retail (12%)• Technology (11%)• Transportation & Distribution (10%)• Energy 7%• …
• CFO (35%)• Controller (16%)• Treasurer (12%)• Treasury Director (5%)• Treasury Manager (3%)• …
10+ Job titles
14+ Industries
From $50 million tomore than $6 billion
• < = $50 million (35%)• $50 - 250 million (24%)• > $6 billion (11%)• $1 - 2 billion (8%)• $250 - 500 million (8%)• …
225 Respondents
Context for Survey
Cash Forecasting remains a challenge - Example
RedEnvelope lose more than a quarter of their value
Due to a budgeting error that resulted in an overestimation of gross margins.
Cash Forecasting remains a challenge - Example
Companies Are Finding More Accounting Flubs
“An uptick in financial restatements from public companies through the first half of the year could derail a decadelong streak of improvements”
– Sept 20, 2018
Cash Forecasting remains a challenge - Example
University of Toledo Loses $2.4 Million in Projected Revenue
Lessons learned: Future-looking financial statements should have extra scrutiny and review. User training would also help prevent these formula-based errors.
Cash Forecasting remains a challenge - Example
Westpac jumps the Gun on Profit
Profit were embedded in a template of last year's results and were accessible with minor
manipulation of the spreadsheet.
Cash Forecasting remains a challenge - Example
Fannie Mae Discovers $1.3 Billion "Honest" Mistake
Lesson learned: When billions are at stake, it's best to have a financial peer review the documentation.
Survey Results
1. Cash forecasting remains the top issue
2. Time is money
3. Processing against the clock
4. A TMS is not made for Cash Forecasting
5. No proper reward structure based on cash flow
Top 5 findings
What is the most important issue for your company over the next year?
Cash forecasting remains the top issue
Ma
jor
go
als
Cash Forecasting Process
Working Capital Management process
• Analyzing operational
cash flow (+ / - )
• Funding subsidiary needs
• Meeting targets
• Freeing up working capital
• Determining requirements for
external financing
• Providing targets for working
capital improvements
Do you use Excel Spreadsheets for the following tasks?Preparation
How are your forecasts prepared?
Do you use Excel Spreadsheets for the following tasks?
Optimizing cash streams in a complex environment
What are the limitations of using spreadsheets to perform?
Optimizing cash streams in a complex environment
What financial systems are used when performing the following functions?
A TMS is not made for Cash Forecasting
Staff
How many FTE are involved in the activities below (average)?
What percentage of staff resources above are spent on the following financial activities?
What percentage of staff resources are spent on creating/updating cash forecasts?
Processing against the clock
Which metrics below does your company use and which ones are used to reward its business units?
No proper reward structure based on cash flow
Best Practicesfor Forecasting
ERP
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Multi - Entity
Multi - Bank
Complex ERP
Multi - Currency$
ERP
ERP
Cash Management in global & complex businesses is challenging
01 02 03 04 05 06
Understand your working capital drivers
Understand your cash flow drivers Define your Cash
forecasting horizons
Define your Cash forecasting sources per time horizon
Integrate and consolidate the data
Define your cash forecast logic / assumptions /Metrics
Effective cash flow forecasting in 6 steps
Effective cash flow forecasting in 6 steps
Integration with different bank statement formats
Short-term forecast:Purchase orders,Purchase invoices, Vendor master data
Other sources
Input & Mgmt of Non-ERP data
Cash projections, purchase budgets
Treasury flows
Payment runs, historicals …
Projects, Capex, Payroll, Taxes, Direct Debits (Rent, Leasings…)
Banks
Throughour available
ERP connectors(plug & play)
Our platform
Data sources
Analysis & Simulations
Refresh• daily of ad-hoc• incremental or full
ERP
(With audit trail in case of manual input)
(from TMS or managed through Cashforce)
• short vs. long term• forecast vs. actuals• forecast vs. forecast• what-if scenarios
Bank Balances (CODA & manual updates payment layer)
Smart forecasting logicSmart algorithms that make your cash
forecast really accurate.
(Excel, Business Warehouses,...)
05Define clear system relationships to consolidate the process
Conclusion
1. Cash forecasting remains the top issue
2. Best practice requires an integrated approach to forecasting
3. Look beyond classic TMS for Cash Forecasting
4. Form strategic partnerships : CFO/FP&A/Treasury => single version of truth
5. Create a reward structure based on cash flow
Conclusion
Q&A
Q&A?
Want to learn more?
Schedule a demo at
www.cashforce.com
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Stay connected
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@Cashforce
Bruce Lynn
Nicolas Christiaen
@Nicolas_Chri
Mark O'Toole
@MarkDOToole
www.cashforce.comhttp://www.thefecg.com/