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Cash Management Techniques & Cash Flow Optimization

Tim Williams's Profile
cash management techniques The mantra "cash is king" is still "in effect: even though the economy has signs of turning the corner. As I try and ensure that my firm is leveraging technology to optimize cash flows and working capital I often still feel "behind the curve" in some sense. I would be interested in some insights as to what is out there in cash management techniques in terms of current and emerging techniques and technology. Are there Cloud and SaaS based applications out there that focus on cash flow visibility, cash flow forecasting, and optimizing working capital?


Dan Everett
Title: Director of Marketing
Company: SAP
(Director of Marketing, SAP) |

There was some discussion about working capital analyis here.

Sarah Jackson
Title: Associate Editor
Company: Proformative
(Associate Editor, Proformative) |

Proformative also offers online courses, including this one titled,

"Corporate Cash Investment Strategies"


"Corporate Cash Management Overview"

And, here is a video introduction. to this Proformative course.


Best... Sarah

David Blumberg
Title: Controller
Company: Vacamas
(Controller, Vacamas) |

Most companies prepare a P & L monthly. Does anyone have thoughts on how often the cash flow statement should be prepared?

Dan Ryan
Title: CFO
Company: Privately held
(CFO, Privately held) |

At least monthly - more frequently if your cash situation is tight or if you make massive cash commitments with long lead-times, as I have done in some manufacturing-based companies. In that case you may need intra period cash forecasts, starting with an accurate starting point for cash. But monthly minimum so you can track your time-to-cash and all of the processes that either hold or free cash at your company. I can't imagine doing it with less frequency b/c at the end of the day, cash is what fuels your business, not profits.

Jacqueline Segal
Title: VP Controller
Company: American Laser Skincare
(VP Controller, American Laser Skincare) |

Most companies prepare a 13-week cash forecast that is updated each week based on the best information available. This takes cooperation of other functions keeping your finance team aware of new projects and changes in timing on item included in the annual budget.

If cash is tight you will want to look further out than 13-weeks, as securing financing, should you detect a shortfall, will take some time in this economy.

Michael Kuhlmann
Title: CFO
Company: Computer Guidance Corporation
(CFO, Computer Guidance Corporation) |

I agree with Jacqueline - weekly updates require your finance team to get closer to the functional drivers in your organization, communicate more frequently with and ultimately influence decisions & actions more effectively.

Topic Expert
David OBrien
Title: Treasury Consultant
Company: EE Treasury
(Treasury Consultant, EE Treasury) |

At Holiday Inns, Fidelity and EDS Corp we updated the cash forecast weekly through quarter end. Note that our forecast was direct (cash based), top down and 96% accurate over a 90 day horizon.

Bruce Lynn
Title: Managing Partner
Company: The FECG LLC
(Managing Partner, The FECG LLC) |

Tim -

There are several tools known as "treasury workstations" than can be useful. As with any tool how it is employed and what measurements are used to judge "success" are as important if not more important than the tool. Example: taking cash flow forecasting seriously whether weekly, monthly, whatever, is key. Knowing how much cash (opening balances + cash flow in - cash flow out) is "enough" is also important. Finally, having treasury become responsible for the cash flow statement from an action perspective (i.e. not just reporting the numbers but actively managing the company's liquidity or financial risks) is also important.

Whether the tools used are in the cloud or "at home" is less important although there is a difference in the investment required to acquire the tools.

Be glad to talk about specifics

Bill Aiken
Title: Principal & CEO
Company: Abacist Group
(Principal & CEO, Abacist Group) |

Hi Tim,

Within my consulting experience, I have usually seen the Cash Flow forecast most successfully being part of a larger financial forecast with the process typically starting with the Sales forecast, then the P&L forecast with the Cash Flow forecast being downstream from these two outputs.

With that sort of integrated financial forecast in mind, there are two pure-play Cloud based forecasting applications: Adaptive Planning and Host Analytics.

Both of these applications were built with the Cloud in mind and work well when multiple users are involved in the forecast process. They certainly were developed more with a FP&A audience than a treasury audience in mind. But both can readily handle a Cash Flow forecast in various formats (Sources/Uses, Indirect Method, Direct Method, etc).

There are other vendors in the Planning/Forecasting space that offer Cloud options, notably Oracle/Hyperion and SAP, but neither of these two vendors built their application(s) with the cloud in mind, and hence, the majority of their customers are running the software "on premise" on their own servers.

Disclosure: my company, Abacist Group, is an implementation partner for both Adaptive Planning and Oracle/Hyperion.

Ray Calabrese
Title: Treasurer
Company: Interim Treasurer
(Treasurer, Interim Treasurer) |

We have used a 13 weeks rolling, cash basis, forecast in all of my previous companies. As mentioned it requires you to get in touch with the drivers of the business. It also requires you to sharpen you judgment and go to other reports the company does on a regular basis, such as budget and outlook. I think it's important that you don't place more time on technology than on judgment. This doesn't have to be a complicated process and works best when you have top down support.

Bruce Culver
Title: Managing Partner
(Managing Partner, CCP GLOBAL) |

In my former roles in FP&A at Gulf Oil and EDS, we performed a rolling 90 day forecast of cash and monitored it weekly. We also used cash margin as one of our metrics to evaluate performance on the operating leaders.
I agree with Bill Aiken above that there are some good SaaS tools out there, but they best suited for FP&A and not Treasury.

As for working capital improvement, our company, CCP Global, works with customers to improve DPO performance through the use of SaaS tools that focus on Dynamic Discount Management. By working with the Procurement officers of our clients, we can help them implement a strategy to move payable terms out further, while providing a relief valve to the supply chain to get paid early through early payment discounting. This is an attractive, win-win solution for the Supply Chain and for Treasury.

Topic Expert
Patrick Dunne
Title: Chief Financial Officer
Company: Milk Source
(Chief Financial Officer, Milk Source) |

As a senior management team, we have a weekly "Outlook" call where we project the month end P&L, balance sheet and the resulting cash flows. Our incentives our based on profitability and cash flows. I mention this as it underlies our focus on cash. We use simple Excel templates as systems can't do this thinking for you. The key thing that you should take away is that using this process each and every week has made us very good at predicting cash flows. I would question forecast accuracy if you expect to pull a report from any type of system.

Shawn McCarthy
Title: Treasury Consultant
Company: KCA Deutag
(Treasury Consultant , KCA Deutag ) |

Everyone is talking about cash forecast but what about bank balance and activity reporting? You need to make sure the link between what is forecast (in multiple currencies for a multinational) and what has actually flowed into the bank accounts is strong and review it at least monthly. There are many treasury management systems that say they have this as a key functionality but make sure that you can see it in action before you buy.....

Ernie Humphrey CTP
Title: VP, Thought Leadership
Company: Stampli
LinkedIn Profile
(VP, Thought Leadership, Stampli) |

Shawn, great point. An accurate cash forecast requires visibility into each and every bank account. This includes account transactions in addition to prior day balance reporting. You need the ability to pull the right data from banks or have them push it to you. There are now cloud treasury applications (even what we used to call workstations back in the day).

Companies can also connect directly to SWIFT leveraging products like SWIFT LITE. In order to forecast cash accurately you need to be able to "control it". To do that you first need 20/20 visibility. This includes access to the information necessary to understand all bank account inflows and outflows.

Companies should reconcile all bank accounts to the G/L at least once a month (if not more often), and there are tools offered by companies like Blackline that help automate the account reconciliation process (which can be quite painful, especially for international accounts).

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