The issue of multiple cash flow forecasting systems was raised several times at the AFP Annual Conference. It is a general problem in cash flow forecasting.

Ohio State University

During a session on treasury workstations at last week’s AFP Annual Conference, Carole Fallon, treasury management officer for The Ohio State University, explained that they used separate bank accounts for the different types of payments and collections, e.g. tuition, which makes it much easier to produce long-term Cash Flow forecasts. They have found that using a TMS for cash flow forecasting is less error prone, but when but can create problems when the CFO or treasurer wants more information not contained on the original report. The TMS supplier needs to develop a new field to produce the new report. 

Ohio State have found it easier just to take the data and put it into Excel. They can then add whatever additional data that they want. With Excel there are issues with things being altered, but it is much more nimble and flexible.

Another problem is that other departments use different systems and data. The controller’s office has different systems and so it is important to check that there is some consistency between their statements and those in the TMS.

Baxter Healthcare Corporation

Baxter produce three different cash flow forecasts:

• short term: 45-day look ahead which is updated daily. Excel based.
• long term forecast: by quarter for rolling 12-month period. An Excel based big ticket items forecast
• Long term global forecast: strategic financing plans which is tied to the 5 year planning process. Using a combination of treasury and business planning systems and processes

Citi research

Citi presented in separate session at AFP presented some results from their Citi Treasury Diagnostics benchmarking research programme, which showed that for 350 of their corporate client the cash flow forecasting tools were dominated by the use of Excel:

Source & Copyright©2013 -  Citi Corp

The companies that use Excel were more likely to be:

• headquartered in a developing market (esp. LATAM & APAC)
• local or regional footprint 
• use a decentralized treasury model (89%)
• have not put in place an In-House-Bank
• do not run shared service centres.

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Cash flow forecasting is a huge problem for all companies, even those that have fully automated the process. A major issue is the number of incompatible systems used to compile the cash flow forecast. Using a TMS is fine until senior management wants additional information and analyses, then the totally flexible Excel is used bringing with it all the security and control issues. Anybody got a better solution?