How Much Cash Will We Have: Perfecting the Cash Forecast

1. How Much Cash Will We Have:
Perfecting the Cash Forecast
May 21, 2020

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3. Today’s Presenters
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Judy Campardo
Kyriba
Sales Enablement Manager
Claudia Gonzalez
Kyriba
Senior Solution Engineer
Tuomas Parikka
Accenture
North American Treasury
Practice Lead
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4. ✓ What and Why of Cash Forecasting
✓ How effective forecasting makes treasury a more
strategic partner
✓ Building the cash forecast using multiple data
sources
✓ The importance of measuring forecast accuracy
✓ The role of spreadsheets in forecasting
✓ Techniques to improve the accuracy of forecast
projections
Agenda

5. The What and Why of
Cash Forecasting

6. Forecasting
6
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• What is cash flow forecasting?
• Estimate of timing and amounts of cash inflows and
outflows over a specific period
• Cash flow forecasting is an essential activity to achieve
key business objectives.
• GPS to help companies navigate
• What makes a good forecast?
• One that is iterative, effective and logical (be able to defend)
• Why Forecast?
• So we can anticipate all possible cash needs in different
economic, geopolitical and societal situations.
• Opportunity to reduce cost (taking advantage of new
interest rates and buying assets of lower value)
Forecast is a way
of mapping
uncertainty, and
uncertainly is
opportunity.”
--Harvard Review

7. Companies across all sectors need to survive with an urgent need for total liquidity
Travel
Luxury
Goods
Auto
Energy
Financial
Service
Industrial
CG&S
Grocery
Retail
Utilities
Comms
& Media
Life
Science
Chemical
NegativePositive
Neutral
Businesses that are affected by the outbreak could see a downgrade to their
credit ratings, making it more difficult for them to raise cash and maintain
liquidity:
The table below, illustrating the Altman Z-score analysis of the S&P 500 companies, shows
that as of late March 2020, 210 companies are in the distress zone (at considerable risk of
going into bankruptcy in the near future). This number is a significant increase from March
2019.
Impact
C19 is expected to have a massive impact across all industries, with no
industry insulated from the far-reaching consequences of this pandemic as
the below “heatmap” shows:
A comparison with the impact of the economic and financial crisis in 2008 on the S&P 100 companies shows what companies
could expect as a result of the C19 crisis – a sharp decline in revenue growth and a further reduction in the already weak
cash flow coverage (ability of a company to pay liabilities using operating cash flow).
Altman Zones Range S&P 500
Companies
(March 2019)
S&P 500
Companies (Mar
2020)
Change
(+/-)
Safe Zone Z > 2.99 236 174 -62
Grey Zone 1.81 < Z <2.99 104 116 +12
Distress Zone Z < 1.81 160 210 +50
The depth of the current crisis should not be
underestimated

8. Today’s CHALLENGES to cash forecasting
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GOVERNANCE
• Lack of support
• Decentralized model
• Difficult to get relevant
data
PERFORMANCE
• Late Results
• Inaccuracy
• High FTE dedication
• Untraceable
DATA
• Silos
• Missing events and
ongoing initiatives
• Data not fully leveraged
STRUCTURE
• Non homogeneous
• Deviation tracking difficult
with incongruent
categories
• Reporting templates not
fit for purpose

9. The importance of (ACCURATE )
cash forecasting
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OPTIMIZED LIQUIDITY
MANAGEMENT
• Minimized cash buffers
• Reduced cost of debt
• Optimized return on
investment
WORKING CAPITAL
& TRADE FINANCE
OPTIMIZATION
• Improved WC terms
Optimized Payables /
Receivables financing
discounts
• improved exposure forecast
• Reduce inefficiencies of
hedging
BANK CONDITIONS
OPTIMIZATION
• Improved bank fees
• improvement in
facility usage
HARMONIZATION,
AUTOMATION &
CENTRALIZATION
• Value added activities
performed
• Process simplification

10. Digital Cash Forecasting
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Unify Cash Forecasts
through DATA
Right use of
TECHNOLOGY
Shift TALENT from
data collection to
decision-making

11. 12
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12. Journey to the leading practice cash forecasting
BASIC
INSIGHTS
Manual and left to business
units interpretation
Error prone
Sanity checks and deviation analysis
are limited
Only Treasury uses forecasts
RPATMS
Visibility
Accuracy
Speed
FTE optimization
Visibility
Accuracy
Speed
FTE optimization
Visibility
Accuracy
Speed
FTE optimization
Visibility
Accuracy
Speed
FTE optimization
AUTOMATED FORECAST
Centrally defined Model
Data processing
are automated
Knowledge based forecasts
Data driven decision on hedging,
funding and investment
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ROBOTIC PROCESS
AUTOMATION
Historical data sets are
centrally stored
Run predictive data modeling
and back testing
Correlations identified
with external data
Forecasts are used beyond Treasury
as an indicator
PREDICTIVE ANALYTICS
Treasury leverages forecast
architecture to build new
capabilities
WC Management, Trade Finance
optimization and FX & Credit risk
Exposure management
Other finance areas supported
PA
1 3 4
Excel

13. How does effective
forecasting make treasury a
more strategic partner?

14. What data sources can
be used to build the
cash forecast?

15. Why is it important to
measure forecast accuracy?

16. What is the role of
spreadsheets in forecasting?

17. What are some techniques
you can use to improve the
accuracy of your forecast?

18. Thank You
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