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Efficient Cash Flow Forecasting – a Best-Practice Guide

There is great potential for corporations to increase financial performance by optimising their cash flow forecasting. Analysis within our client community highlights that through the implementation of best practices, organisations know exactly where their cash is, are able to optimise their cash, and can manage liquidity risk more effectively. Specialised technology helps corporates to leverage significant efficiency gains. Manual tasks in the collection of data and in reporting are reduced through highly automated processes, and corporations achieve true global visibility of their cash and forecasting objectives.

Why focus on cash flow forecasting?

During the financial crisis, corporations learned, some the hard way, the value of placing more emphasis on effective cash and liquidity management. In times when the banks became increasingly restrictive in their lending policies in providing cash to corporations for smoothing any gaps in their cash flow curve or for investing in business development, corporations instead had to turn to their own resources and eke out every free penny. In order to mobilise their own resources, corporations need to have reliable data representing their actual and expected cash position. Thus, if companies achieve greater efficiency in their accounts receivable and payable processing, they are laying a solid foundation for a strategic liquidity management structure: the more clearly they know where their cash is and what their cash requirements are over a certain period of time, the better they can steer their corporate ship through otherwise murky waters.

Without efficient cash flow forecasting, companies cannot analyse, track, and manage risk exposures that continuously challenge treasury. Maintaining optimal levels of liquidity is crucial for ensuring the continued success of a corporation. If companies have too much unused cash lying around in bank accounts or even in corporate in-house accounts, they will lose out on interest earnings and may even have to pay interest fees for external capital. If, however, corporations continuously operate under their minimum liquidity requisites, the consequences are worse and they risk bankruptcy or foreclosure.

The benefits

Securing corporate liquidity