Cash Forecasting: Your Blueprint for Liquidity Performance
This article is a contribution from our content partner, Kyriba In today’s fast-paced financial environment, accurate cash forecasting serves as a blueprint for organizations aiming to maximize liquidity performance, reduce risk, and make strategic decisions with confidence. As financial teams navigate increasingly complex markets, political instabilities, and protectionist policies, predicting cash flows with precision is crucial for maintaining financial security, optimizing working capital, and supporting long-term business growth. In the context of global economic challenges such as tariffs, trade wars, and supply chain disruptions, robust cash forecasting empowers financial leaders to manage elevated costs, alleviate squeezed profit margins, and mitigate cash flow inconsistencies. This comprehensive guide offers an in-depth exploration of cash forecasting, emphasizing its critical role in treasury management and highlighting advanced strategies and technologies to achieve forecasting excellence and optimal liquidity performance. We will explore the challenges organizations face in achieving cash forecast accuracy and outline strategies to enhance these critical financial processes. By leveraging these insights, finance leaders can ensure their organizations remain agile and resilient in an ever-evolving economic landscape. Understanding Cash Forecasting Amidst the challenges posed by supply chain disruptions, regulatory shifts, and tariff uncertainties, cash forecasting equips organizations with the ability to anticipate and plan for financial needs. It is a critical process for maintaining financial stability, supporting strategic planning, and ensuring that an organization can meet its financial obligations. Cash forecasting has evolved from manual spreadsheets to sophisticated AI-driven models to address the dynamic needs of modern businesses. This evolution reflects the increasing complexity and speed of business operations, requiring more advanced and accurate forecasting tools. Understanding the fundamental components of cash forecasting is essential for effective financial management. These key concepts include various forecasting methods, the strategic application of time horizons, and the integration of critical data inputs. Together, they form the foundation of a robust forecasting strategy, enabling organizations to anticipate financial needs, adapt to market changes, and make informed decisions that drive long-term success. Forecasting Methods Time Horizons Data Inputs By integrating these forecasting methods, time horizons, and data inputs, organizations can achieve a comprehensive view of their financial future, enabling them to make informed strategic decisions and maintain robust cash management practices. Benefits of Accurate Cash Forecasting Recent financial market fluctuations demonstrate the critical role of accurate cash forecasting in maintaining liquidity and strategic agility. Companies with precise cash forecasting can adjust their investment and financing strategies quickly, avoiding liquidity shortfalls and capitalizing on favorable market conditions. This agility allows financial leaders to maintain operational stability and pursue strategic opportunities even amidst economic uncertainty. The benefits of accurate cash forecasting enhance an organization’s ability to manage cash and liquidity effectively, while also supporting strategic financial planning and risk management. By leveraging these capabilities, businesses can achieve greater financial stability and strategic agility. Enhanced Cash Visibility and Liquidity Management Cenveo Unwraps $490K inValue with 93% Cash Forecast Accuracy By adopting Kyriba’s Liquidity Performance Platform, Cenveo achieved a remarkable 93% improvement in cash forecast accuracy and a 90% increase in productivity, unlocking $490K in value in less than three months. This transformation enabled on-demand liquidity visibility and streamlined cash management processes, saving significant operational hours monthly. This comprehensive transformation not only improved operational efficiency but also paved the way for evaluating new financial opportunities, such as a potential $17.7 million cash flow benefit from supply chain financing and an estimated $1 million from business interruption claims. Improved Financial Planning and Risk Mitigation Varsity Brands Wins with100% Cash Visibility and 90% Cash Forecast Accuracy By integrating Kyriba’s advanced cash forecasting tools, Varsity Brands achieved forecasting accuracy exceeding 90% and gained 100% cash visibility. The transition to Kyriba enabled Varsity Brands to efficiently reconcile bank transactions, optimize cash positioning, and enhance overall financial strategy. This improvement not only streamlined their financial operations but also empowered the finance team to make data-driven decisions with confidence. By achieving such high levels of accuracy and visibility, Varsity Brands is poised sustained growth and operational efficiency, demonstrating the critical role of precise cash management in driving business success. Qualitative Benefits: Strategic and Operational Advantages Bray International Opens the Valve to97% Productivity and 100% Cash Visibility By adopting Kyriba, Bray International achieved remarkable results, including 100% cash visibility and a 97% improvement in productivity. This transformation not only provided comprehensive insights into cash positions but also significantly reduced the time and effort required for financial management tasks. Bray International standardized forecasting processes and improved the accuracy of cash management, leading to substantial operational efficiencies. This strategic shift allowed the company to optimize liquidity performance and support better decision-making across its global operations. By leveraging advanced treasury management technology, Bray International has positioned itself for continued growth and operational excellence, demonstrating the critical role of comprehensive cash visibility and efficient treasury operations in driving business success. Quantitative Benefits: Financial Optimization and Growth Potential The Challenges of Cash Forecasting In the current economic landscape, cash forecasting has become increasingly challenging. The complexities of global events—geopolitical tensions, trade wars, and economic shocks—highlight the need for resilient cash forecasting processes. Addressing cash forecasting challenges requires a combination of advanced technology, strategic planning, and effective resource management to create a resilient cash forecasting process that can adapt to both internal and external pressures. Internal Challenges Data Accuracy: Ensuring the accuracy of financial data is crucial for reliable cash forecasting. Errors in data can lead to incorrect forecasts, which may result in poor financial decisions and unexpected cash shortages or surpluses. Integration Issues: Organizations often face difficulties in integrating data from multiple sources, such as ERP systems, bank statements, and other financial tools. Disparate systems and data silos can complicate the consolidation process, making it challenging to achieve a comprehensive view of cash positions. Resource Constraints: Limited resources, including time, personnel, and technology, can hinder the effectiveness of cash forecasting. Many organizations struggle to allocate sufficient resources to develop and maintain robust forecasting processes, often relying on manual methods that are time-consuming and error-prone. External Challenges Market Volatility: Fluctuations in market conditions can significantly impact cash flow predictions. Factors such as currency exchange rates, interest rates, and commodity prices can change rapidly, introducing uncertainty…
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10 Ways to Optimise Your Cash forecasting
This article is written by Embat In the business world, effective financial management is critical to the success and sustainability of any organisation. An essential part of this management is cash forecasting, a process that allows companies to forecast their future cash flows. In this article, we will explore 10 effective ways to optimise your cash forecasting, ensuring more accurate and reliable financial planning. What is cash forecasting? Cash forecasts are a kind of financial roadmap that companies use to anticipate how much liquidity they will have in the future. These projections include estimates of how much money will come into the company (cash inflows) and how much will go out (cash outflows) in a given period, such as a month, a quarter, or a year. In conducting these cash forecasts, it is crucial to consider both accounts receivable and accounts payable, focusing on those with specific due dates. In addition, it is important to include all planned cash outflows, such as payroll, tax, and National Insurance payments. Other cash inflows, such as bank loans or grants, should also be considered. These forecasts allow business leaders to understand how much money is expected to flow in and out of the company in a future period. This information is not only essential to ensure that sufficient cash is available to cover day-to-day operations but also to plan investments, manage debt, and prevent liquidity problems. How to optimise your cash forecasting? 10 tips As with all other business and financial considerations, cash forecasting is generally a complex process, as it is influenced by many variables. Fortunately, there are a few tips that any treasurer can apply now to optimise their cash forecasting. Here are the 10 most important ones. 1. Analyse historical data The first step to optimising your projections is to carefully analyse your company’s historical and financial data. This retrospective review provides patterns and trends that are critical to formulating accurate projections. Using advanced analytical tools and statistical techniques, such as regression analysis and predictive modelling, reveals valuable insights that might otherwise go unnoticed by management. 2. Manage your receivables and payables efficiently Accounts receivable and accounts payable are the two most important elements of accurate cash forecasting. In essence, they are the trade debts that our company owes to suppliers and that our customers owe us for deferred payment of invoices. Nevertheless, they are not always adequately reported, and this can have a negative impact. If invoices do not arrive on due dates, it becomes unclear when the invoice amount will be received. In addition, it is important that invoices are clear and error-free and that it is not too late for an invoice to be acted upon. Follow up regularly on outstanding payments to avoid future problems. 3. Collaborate across departments Cash forecasting is not just a task for the finance department. It requires active collaboration between all agents and workers within the company. For example, the sales team provides information on market trends and revenue expectations, while the purchasing department may have data on future expenses and the tax team may provide relevant information on upcoming tax assessments. This cross-departmental communication ensures that all relevant variables are considered within these forecasts. It also ensures that they are always up to date. 4. Adequately monitor market conditions Market conditions can change rapidly, significantly affecting cash forecasting. A change in interest rates makes debt more expensive, while a tax increase reduces sales. Staying on top of key economic indicators, such as interest rates, inflation rates, and market movements, is critical. Adjusting your projections based on these indicators can help anticipate and mitigate the impacts of market changes on the financial health of your business. 5. Efficient inventory management Efficient inventory management plays a key role in optimising a company’s treasury. A well-managed inventory ensures that capital is not unnecessarily tied up in stock while also preventing shortages that could lead to lost sales. To optimise this important aspect of business performance, it is important to understand the demand patterns for your products and services, including seasonal variability. This allows you to anticipate when you will need more or less stock and resources, thus optimising purchasing and production. 6. Continuous employee training Continuous training and development of the finance team is essential to maintain and improve efficiency and accuracy in the management of corporate finances. A well-trained team is better equipped to meet financial challenges, adapt to market changes, and effectively use new technologies and methods. Training can range from basic accounting and finance concepts to sophisticated use of a treasury solution and financial risk analysis. Investing in professional training programmes and specific workshops, as well as access to online courses and conferences, can provide staff with the skills and knowledge necessary to effectively manage the company’s finances. 7. Efficient working capital management Effective working capital management is an important aspect of improving cash forecasting, as it focuses on optimising the management of cash, inventories, receivables, and payables. By managing these components efficiently, a company can ensure adequate liquidity and greater financial stability, resulting in better cash forecasts. The objective is to maintain a balance that allows the company to have enough cash available to meet its daily operations, such as payroll or tax payments, but without tying up too much capital in non-productive assets. 8. Tax planning Efficient tax planning is essential to optimise a company’s cash forecasting. Tax planning involves understanding and implementing tax strategies that help minimise the tax burden in a legal manner while ensuring compliance with all tax obligations. By taking advantage of available deductions, exemptions, and tax credits, a company can significantly reduce its tax liability, which in turn frees up more capital to reinvest in the business or to hold as a cash reserve. In addition, knowing in advance what the next settlement will be reduces uncertainty around cash projections. 9. Automating payments Implementing automated payment systems significantly reduces the possibility of human error, which can arise from manual data entry or the tracking of multiple installments. This can lead to problems such as duplicate payments, late payments resulting…
Treasury Contrarian View: Are Treasurers Too Conservative with Cash?
In uncertain times, treasurers often lean toward holding more cash as a buffer against risk. Liquidity is king, right? But here’s the contrarian view: Are treasurers holding too much cash and missing opportunities to drive value through smarter investments? Is conservative cash management a strength—or a missed opportunity? The Case for Holding Excess Cash The Case for Putting Cash to Work Finding the Balance: Smart Liquidity Management Rather than extremes, the future lies in a balanced approach: Let’s Discuss We’ll be sharing views from treasury leaders, tech providers, and institutional investors—join the discussion and let us know your take! COMMENTS Lorena Pérez Sandroni, Treasury Masterminds board member, comments: Cash is king, and treasurers often face significant pressure during uncertain times. Balancing this pressure to meet the expectations of stakeholders, investors, and CFOs, while ensuring we hold enough cash to cover operational needs without holding too much, can sometimes feel like a martial art. In my opinion, we should not be overly conservative. We must monitor the minimum cash balance and short-term needs, as well as extraordinary events, to challenge established targets. I prefer to do this at least quarterly, considering that our analysts will closely review and monitor the short-term needs (at least 8 weeks) to identify any extraordinary requirements. In the ideal world of Treasury, we would seek cash pool structures and products that enhance our efficiency in holding cash. We would negotiate the remuneration of our excess cash and remain continuously curious about market developments to improve and drive value from our idle cash. However, different approaches are necessary depending on whether you are a Regional Treasurer or managing Corporate accounts. In the latter case, it is crucial to help the company understand the benefits of cash centralization, In-House Banking (IHB) when possible, and any cash management products that coordinate cash where and when it is needed. As well as how by centralizing our cash we can also improve Risk management , for example in the cases where your company operates in emerging and high risk countries. Smart liquidity management isn’t just about maximizing returns. Treasurers sometimes need to prioritize strategic initiatives over immediate financial gains, such as reallocating cash to support global operations or business strategies. Being flexible and understanding the impact and importance of cash centralization is the most visible way treasurers contribute directly to business initiatives. Control, monitoring, evaluation, and control again! Whether you are in a sophisticated and automated Treasury environment or dealing with thousands of Excel tabs and dozens of currency pairs, you must know your minimum cash requirements to manage properly and make the right proposals for Smart Liquidity Management with an holistic view. Patrick Kunz, Treasury Masterminds founder and board member, comments: Treasurers: Guardians of Cash – But Don’t Stop There As treasurers, we’re the guardians of cash – and we’re good at it. But once the guarding is done, that’s not the end of the line. Too often, cash just sits idle in a bank account. And, I hate to say it, frequently earning 0% interest. Let’s not even dive into the counterparty risk of leaving large balances at a bank – a risk often overlooked but very real. (Remember Credit Suisse? Gone in days. Lehman? Weeks.) So, fellow treasurers, it’s our duty not just to protect cash, but to put it to work. That means finding the balance between maximizing return without significantly increasing risk. Easier said than done – I know. It depends heavily on your company’s cash position, volatility of cash flows, and, of course, the current interest rate curve. For years, there wasn’t much point locking away cash for longer periods. But today, interest rates shift faster than US tariffs – so keep a close eye on them. And yes, that means your investment policy and strategy should be reviewed at least annually. I still see too many clients leaving money on the table – and that’s a shame. Your cash can do more. Also Read Join our Treasury Community Treasury Mastermind is a community of professionals working in treasury management or those interested in learning more about various topics related to treasury management, including cash management, foreign exchange management, and payments. To register and connect with Treasury professionals, click [HERE] or fill out the form below to get more information. Notice: JavaScript is required for this content.
What are Multi-Bank Platforms
This article is a contribution from our content partner, Just Introduction to Multi-Bank Platforms Multi-Dealer platforms are a great example of how technology continues to improve markets. These electronic platforms are non-exchange financial trading venues which enable trade matching between counterparties, offering pricing from a selection of investment banks. After the introduction of electronic broking systems in the inter-bank market, some Foreign Exchange vendors created electronic trading systems for their customers to transact with them electronically. Initially, these systems, known as “single dealer platforms” (SDP), were provided by large Foreign Exchange trading banks as a means for broker clients to deal directly with the bank. The decreased profitability of the interbank market, alongside growing demand for foreign exchange services from a range of clients, led to the development of new software. Notably, client demand for more diverse pricing led to the development of MDPs such as FXall and 360-T. These platforms quickly rose in popularity with the prevalence of algorithmic-based trading further flourishing in this new diverse landscape allowing algos to take advantage of a wide range of pricing inputs and liquidity sources. Whilst the majority of agency trading takes places on these multi-bank platforms, some liquidity providers do still use single-dealer platforms such as Barclays’ platform BARX. Many banks prefer for their clients to use SDPs firstly due to the obvious reason that there is no competition from other providers but also because it helps them to develop more relationship-based pricing as they increase their understanding of specific client needs and finally because the platform provides a good opportunity for the bank to upsell and cross-sell its clients to various other services and products. In a clear move intended to retain clients as well as attract new clients, who might otherwise have opted for the diverse pricing of the MDPs Barclays has recently introduced GATOR, an add on it to its renowned single dealer platform BARX, which uses a hybrid execution model combining external liquidity with Barclays own liquidity and thus combines the benefits of both SDP and MDP models. Improving Best Execution The prevalence of algorithmic trading has also been employed by brokers and liquidity providers to help achieve best execution with, for example, the advent of “Smart Order Routing” (SOR) which benefits both the liquidity providers (sell-side) and the liquidity takers (buy-side). Sell side SOR helps firms choose between execution venues to achieve the best possible price and minimise fees whilst buy side SOR seeks to minimise execution costs and offset market impact by managing multiple execution venues. The BARX Dynamic Router is an example of SOR which looks to route orders to venues with the greatest likelihood of filling the order so as to minimise information leakage. Better Trade Cost Analysis Algorithms are also being increasingly employed to achieve best execution by real money players too who might, for example, need to use a time or volume-weighted approach to filter a large order into the market whilst minimizing market impact. Technological advances in electronic trading are also helping traders monitor their trade costs with MDP platforms providing increasing means of monitoring trade cost analysis which seeks to identify the cost of any delay in execution, the cost of demanding liquidity, opportunity cost and also performance against a specified benchmark. Better Reporting & Analytics Platforms such as 360T distinguish themselves by their enhanced reporting and analytics which offer a highly granular breakdown of trade capture metrics measured against industry benchmarks. The benefits to clients are plentiful: 360Ts FX platform (360TGTX) offers over 500 pricing streams offering clients unique differentiated liquidity which can be specially customised for individual client needs. Clients also benefit from ultra-low latency matching technology with 360T providing rea-time tick data at 67 seconds allowing for ultimate price transparency. More Effective Transaction Cost Analysis This better level of price transparency is what makes platform such as FXall so popular with corporate users. Clients are able to undertake much more efficient transaction cost analysis. Through optimising trade execution, users can better evaluate the cost and effectiveness of their execution strategies to make better pre-trade decisions such as liquidity provider selection. Also Read Join our Treasury Community Treasury Masterminds is a community of professionals working in treasury management or those interested in learning more about various topics related to treasury management, including cash management, foreign exchange management, and payments. To register and connect with Treasury professionals, click [HERE] or fill out the form below. Notice: JavaScript is required for this content.
The Modern Treasurer: A Strategically Skilled Financial Leader
Treasury professionals must possess a diverse set of competencies. Treasury Masterminds recently conducted a poll among nearly 100 treasury professionals, exploring the question: “What do you think is the most important skill for a treasurer to have?” The findings offer valuable insights into the treasury function’s evolving demands and highlight the multifaceted nature of the treasurer’s role. A Strategic Shift The most prominent skill identified was Financial Strategy & Forecasting (30%). This underscores a significant shift towards strategic involvement within treasury. Treasurers are no longer confined to transaction-oriented tasks; instead, they’re increasingly expected to contribute strategically, advising the business on growth opportunities, financial health, and sustainable success. Core Foundations Remain Essential Close behind, Cash Management Expertise (27%) was rated highly. Despite the strategic evolution, efficient liquidity management remains fundamental. Without robust cash management skills, strategic initiatives may falter due to financial instability. Treasurers continue to play an essential role in securing operational liquidity, which remains a crucial pillar for business continuity and success. Navigating Uncertainty through Risk Management With Risk Management Proficiency (20%) closely following, the poll results indicate the importance of proactively identifying, assessing, and mitigating risks. Today’s treasurers must handle financial market volatility, operational risks, and unforeseen economic challenges. Effective risk management has become indispensable in securing the company’s financial health and strategic goals. Leadership and Communication: A Critical Soft Skill The importance of Leadership & Communication (18%) emphasizes that technical treasury skills alone are insufficient. Effective treasurers are increasingly called upon to lead teams, communicate complex financial insights to various stakeholders, and influence strategic decisions across the organization. Strong leadership and communication skills enhance a treasurer’s ability to ensure alignment across departments and effectively execute strategic plans. Technology: Essential Enabler, Not Primary Skill Interestingly, Technology Adeptness (5%) ranked lower in priority. This doesn’t minimize technology’s importance; rather, it positions technology as a crucial enabler rather than a standalone essential skill. Technological advancements allow treasurers to perform tasks more efficiently, enabling them to focus their expertise on strategic, cash management, and risk management activities. Conclusion: A Multifaceted Approach for Success The poll results reinforce that treasurers need a balanced skill set to thrive. While strategic insight increasingly defines the treasury role, mastery of cash and risk management remains vital, supported by robust leadership and communication abilities. Technology, while integral, serves primarily as an enabler, enhancing efficiency and allowing treasurers to amplify their strategic impact. Today’s successful treasurers combine financial acumen with strategic foresight, robust risk management, clear communication, and technological literacy, positioning themselves as indispensable strategic partners within their organizations. What do you think—does this match your experience? Share your insights in the comments below! Also Read Join our Treasury Community Treasury Mastermind is a community of professionals working in treasury management or those interested in learning more about various topics related to treasury management, including cash management, foreign exchange management, and payments. To register and connect with Treasury professionals, click [HERE] or fill out the form below to get more information. Notice: JavaScript is required for this content.
The Three Lines of Defense: Simple in Theory, Tougher in Practice
This article is a contribution from one of our content partners, Avollone What’s the deal with the 3 lines of defense? When speaking to funds and other regulated companies, I almost always discuss the Three-Line Defense (LoD) model. The idea of the lines of defense was first formulated in 2011 by the Basel Committee in their report “Principles for the Sound Management of Operational Risk” and related to operational risk management principles. Still, it had been in the making years before by more mature risk management practitioners. It’s a model that’s easy to understand from a theoretical viewpoint but hard to implement practically, as this is usually when all the dilemmas and organizational differences come to light. In short, the 3 lines and their responsibilities are: 1st Line of Defense: Business Units and Front-Line Employees. 2nd Line of Defense: Risk Management and Compliance Functions. 3rd Line of Defense: Internal Audit and Independent Assurance. The typical problem for a smaller organization is that it’s simply impossible to spread the lines of defense on multiple people. This implies that you will have people “double-hatting” across 1st and 2nd LoD tasks. This adds to the requirements for documenting conflict of interests and to the required integrity of that person. There is no silver bullet to this other than being fully transparent about the conflicts by documenting this in relevant framework documents. This way, the firm shows the regulator that it is making conscious choices. It’s better to have made a well-documented but wrong choice, as the regulator can see that the firm has thought about it and been transparent about it. For bigger organizations, the problem is related to the size of the beast and the time it takes to implement changes. Implementing the LoD model requires larger changes, including moving tasks (and often people), reporting obligations, changing processes, and technology. The sheer grit and grunt work required is often underestimated, but it always starts with some very long workshops to define the to-be solution. After this come the relevant actions and changes needed. Again, it’s better to have defined the to-be model and be transparent that it’s under implementation than to knowingly run around with a model that is not fit for purpose and has been poorly implemented. Also Read Join our Treasury Community Treasury Masterminds is a community of professionals working in treasury management or those interested in learning more about various topics related to treasury management, including cash management, foreign exchange management, and payments. To register and connect with Treasury professionals, click [HERE] or fill out the form below. Notice: JavaScript is required for this content.