“If Lufthansa can do it, so can we.” This could be the motto in all treasury departments at the moment given that there is hardly any other German corporate currently facing greater challenges in terms of cash flow forecasting. So, how does Lufthansa forecast its cash flows and how is its treasury department dealing with the new demands?

Europe’s largest aviation group has been using the TIP treasury information platform for the past 18 years and has already established long-term forecasting over a period of 27 months during this time. A very reliable approach under ‘normal’ conditions which nonetheless had to be reconsidered and re-evaluated due to the massive declines in cash flows as a result of COVID-19. TIP is a particularly flexible solution which has been designed to also respond and develop fast to changing requirements. This is one of the reasons why Lufthansa decided to also manage this task with TIP: “The COVID-19 crisis has redefined cash flow forecasting. TIPCO immediately understood the situation we are facing, grasped our requirements and swiftly implemented them. This was extremely important and helpful for us.” summarises Thomas Linnert (Head of Corporate Treasury Operations).

We were able to demonstrate just how flexible the software really is in less than two weeks. An impressive performance on both sides given that the goal was not only to set up a short-term, week-by-week, currency-differentiated cash flow forecasting system, but also a significantly more detailed forecasting structure which still needed to be easily understandable in terms of its scope and remain user friendly. Working together with the team at Lufthansa responsible for cash flow forecasting, our treasury consultants developed practical forecasting tools which make TIP a reliable and effective crisis management tool for both the parent company and the subsidiaries.

One of these tools is an Excel upload feature which enables local users to upload data from their own templates into the forecast. This allows the forecasters to easily and quickly import existing data and also avoids manual transfer errors. With the same goal in mind, a mirroring function was also implemented which automatically ‘pre-fills’ internal cash flows on the other side of the equation (sellers’ rule) so that existing data don’t need to be entered twice. Carlos Scheeren, the project lead for the implementation of the week-by-week forecast at Lufthansa: “The quality of the forecasting done by our subsidiaries is extremely important. The forecasting tools in TIP provide us with a way to support the local units in their work and at the same time to improve data quality at the group level.”

Impact

As a result of the action taken in response to COVID-19, the main focus of many large corporates around the world in on the quality of their forecasting data. To ensure that all users capture their data as accurately and reliably as possible, they need to be able to regularly check their forecasting quality in a timely manner. Both subsidiaries and corporate finance, therefore, have the means to view deviations from the last forecast entered using a data analysis tool based on the TIP database so that they can better estimate their forecasting behaviour and learn from the past.

10 days

From the action plan to the implementation and the go-live, all Lufthansa needed was ten days and was already able to forecast its global liquidity at the beginning of April. An impressive performance on the part of everyone involved despite the challenging deadline. We would like to thank Lufthansa for the trust placed in our team and our software, and to wish our client all the very best for the coming weeks and months.

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This article was previously published on the TIPCO website