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Cash flow forecasting is vital ingredient in corporate treasury

The launch, earlier this week, of HSBC’s new Liquidity Management Portal, is to be followed early next year by a new Cash Flow Forecasting platform, shows how liquidity management and cash flow forecasting are interwined. 

There are now a growing range of suppliers who focus on this area:

  • CashAnalytics focus on “a range of critical treasury and finance tasks such daily cash and liquidity management, mid term planning, stakeholder reporting and foreign exchange risk management”
  • Cashforce “connects to all cash-impacting data sources, to build a highly accurate cash forecast. Smart algorithms are applied to provide even more accuracy and will show pro-active optimization actions.”

The rising importance of cash flow forecasting 

 Bruce Lynn, Managing Partner at The FECG LLC, who in the final stages of a survey of over 200 companies around the world and their use of cash flow forecasting and working capital management, believes that the importance of cash flow forecasting is growing due to “rising interest rate environment, the first in about 10 years.” He is finding that:

  • The ‘best’ companies will acknowledge this importance and seek to narrow the inherent variances which will occur because the future is inherently uncertain.
    • They will need to invest to obtain “visibility” over their “flows” (work, cash, accounting, information). Investment will mean changes to not only treasury but operating units where the Major cash flow occurs.
    • The smarter of these companies will actually reward their staff for generating more and stable cash flows, along with the usually profits
    • Problem (as survey seems to indicate): lack of information at operating level; relative unimportance of cash flows vs profits. High dependence on 1980’s technology (i.e. spreadsheets)
  • The rest of the companies will see their capital costs increase as they become overborrowed or underinvested. At risk – inability to meet their competitor’s actions in the short term leading to longer term inequality (i.e. non-competitiveness). Risk will be especially high for companies currently highly leveraged.”

(Lynn’s article will follow in due course.)


CTMfile take: Accurate and timely cash flow forecasting is becoming essential.


This item appears in the following sections:
Cash Flow Management & Forecasting
Cash Flow Forecasting
Global Cash & Liquidity Management
Global Cash Visibility
Liquidity Risk Management

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