The manager of global treasury operations at Chiquita Brands International describes the company's business and cash forecasting process:
Chiquita Brands International is a leading international marketer and distributor of food products -from bananas to salads. The company markets its healthy, fresh products under the Chiquita and Fresh Express brands and other related trademarks. With annual revenues of more than $3 billion, Chiquita employs approximately 23,000 people and has operations in nearly 80 countries worldwide.
Chiquita’s corporate treasury department is located at its global headquarters in Cincinnati, Ohio. The treasury department is centralized and is responsible for various functions, including credit and capital markets, bank relationships, treasury/cash operations, hedging and financial risk, enterprise and insurance risk, and credit analysis and collections. The responsibility for cash forecasting falls within the treasury operations group, which also oversees cash management, bank account management, debt management, and cash investing.
In 2007 the cash forecast process was no longer working to meet the needs of the business. The process relied on monthly data provided to the financial planning and analysis group for longer-range business planning, and sharing of databases developed by the FP&A group for an entirely different purpose besides short-term cash management. As such, the forecast data did not provide all the right information we needed to optimize the movement and investment of our cash.
In late 2007, we began the process of rebuilding the short-term cash forecast. We started by asking ourselves the most fundamental question of all: “Why do we need a cash forecast?” The answers to this question helped determine our path.
To leverage our limited internal project resources (two people available for the forecast project on a part-time basis), we decided to take a phased approach to divide the forecast into geographic regions, and then further divided it into receipts and disbursements. Most of 2008 was spent building out the individual parts of the forecast and then consolidating them all into a global product.
Treasury chose to begin working with European (EU) receipts. We engaged the local business partners in the process to find a solution that would work for everyone. Since they are the most familiar with their business model, we decided to have the local business units input their own data. We created Excel templates for each division and a regional summary file that automatically consolidates all the individual business unit templates within that region. These Excel files were placed on SharePoint in order to provide a single point of access for everyone. When we completed the initial structure of the forecast for the EU, we began to layer on more and more legal entities around the globe.
In 2009 the focus shifted from building to improving. With the necessary structure, the focus shifted to business units providing more accurate data and reducing the variances between forecast and results. The treasury team had been performing variance analysis every week to determine the material differences and had been requesting the local forecast providers to submit an explanation of the variances. However, we wanted to ensure that the accuracy level was visible to both local management as well as senior finance management. This is how our Forecast Scorecard was born.
The Forecast Scorecard was developed to track and report forecast accuracy by region and by individual business unit and shows performance data for the prior month. Receipt and disbursement accuracy targets were established for each region and the scorecard provides an overview compared to targets for the region and more specific data for each business unit within a region. The scorecards are prepared monthly and distributed to senior finance management, local controllers, and the forecast owners.
While significant progress was made in 2009, the cash forecasting process continued to be more regional than global. Each region had its separate version of Excel templates and methods of submitting forecast data. For example, while some used SharePoint, others sent emails with attachments. This made consolidation of regional data into a useful global forecast tedious and time consuming.
In 2010 the focus turned to standard-ization. Treasury was challenged with transforming the forecast process into a single global process rather than operating several regional processes. Treasury began requiring all business units to use SharePoint and standardized Excel templates to input data. A single SharePoint site was created with regional folders. Each folder includes standardized templates for receipts and disbursements, as well as a variance analysis. Every week, users from each business unit around the world log in and input weekly forecast data. Each individual template automatically con-solidates into a summary file that is used to create the global cash forecast. In addition to entering forecast data weekly, each business unit also must input explanations on major variances. This has drastically decreased the time treasury spent following up on weekly variances.
Using a collaboration site like SharePoint helps treasury to control and track usage of the templates. Treasury maintains administrative access to the site limiting access to only the necessary users, helping to ensure the integrity of the data provided. Standardizing the forecast process using a collaboration site has decreased the time allocated to consolidating data for the global forecast, reduced the chance of human error, and enabled time to be devoted to variance analysis, which provides the most value to the business.
Today, Chiquita has an eight week rolling global cash flow forecast that is updated and issued to senior finance management weekly. The forecast report includes globally consolidated cash flows, regional cash flows, regional actual data, regional variance analysis, and charts that show cash flow trends over prior periods and forecasted periods. The data included in the report is input by many users from around the world. The cash forecast process captures 96 percent of Chiquita’s global cash and encompasses more than 50 legal entities.
The cash forecast process at Chiquita has come a long way in a short time and it continues to improve. The support of senior management from day one was crucial to the successes we have had in revitalizing the short-term cash forecast, and will continue to be so going forward. Other factors that have contributed to the success of the cash forecast process are making this a collaborative effort and keeping everyone involved by fostering clear and open communication between treasury and the local business units. Chiquita went from having limited ability to measure accuracy to having accuracy percentages of 94 percent or greater for receipts and disbursements in each region.
Amy Lainge, CTP, is Manager of Global Treasury Operations, Chiquita Brands International, Inc.