Cash forecasting may be all about predicting a company's future
cash flows, but for treasurers cash forecasting is all about the
That's because in today's volatile and uncertain environment,
cash forecasting has never been more critical-or in demand, said
Jason Torgler, vice president of strategy for Reval and contributor
to the new AFP
Guide to Strategic Global Cash Position Forecasting.
"Cash position forecasting is one of largest value-added
functions a corporate treasury operation can perform," said
Torgler. "It can have a tremendous hard and soft dollar impact on
an organization. Accurate and confident cash flow forecasts can
lower borrowing costs, increase yield, control volatility on
foreign currency gains and losses, lower transaction fees, minimize
credit and counterparty risk, assist in acquisition strategy and
many, many others."
Given its importance, it's no surprise that other cash
forecasting guides exist. What sets the AFP Guide apart from its
competitors is its comprehensiveness. "It can serve as both a
one-stop shop for launching a cash forecasting program and
optimizing an existing cash forecasting program," said Torgler.
The AFP Guide includes:
- Statistical techniques for cash forecasting
- A step-by-step guide to building a cash forecast
- Best practices in cash forecasting
- Case studies provided by four corporate treasury
departments-one domestic and three multinationals.
"A solid forecast allows for better strategic alignment with the
CFO," Torgler said. "The CFO maps out the financial plan for the
business. The cash forecast, and anticipated changes along the way,
serve as a GPS for the working relationship between the treasurer
In the process of writing the guide and interviewing the four
corporates, Torgler, who has advised corporates on cash forecasting
for 12 years, uncovered two new trends. First, organizations are
committed to full, global visibility of worldwide cash
balances-"the foundation required to begin forecasting," he
Second, treasury professionals are collaborating better with
their business units. "Business units serve as a key input within
the forecasting process," Torgler added.
3 Cash forecasting best practices
Corporates can click here to
download the AFP Guide to Strategic Global Cash Position
In the meantime, Torgler offers three quick tips to improve cash
- Understand your vision for
forecasting. "What is your goal?" Torgler said.
- Expect variances. "Forecasts are never
- Performance-test your
forecast. "Understanding where variances are coming
from is the first step toward correction."