Editor’s note: NeuGroup’s online communities provide members a forum to pose questions and give answers. Talking Shop shares valuable insights from these exchanges, anonymously. Send us your responses: [email protected].
Context: Better cash flow forecasting is a goal shared by nearly every treasury team. That’s true no matter how far along they are on the seemingly endless journey to automate processes, access and analyze quality data, and leverage advanced technology—including machine learning (ML) and AI—to reach higher levels of accuracy and efficiency.
- Some NeuGroup members are clearly benefiting from advances in tech. A year ago, we brought you the story of one corporate transforming cash forecasting thanks to “data scientist wizards” from the company’s global finance organization who built statistical models and ML forecasts.
- Last month, we ran an article quoting Bristol Myers Squibb treasurer Sandra Ramos-Alves describing how her treasury team is making forecasting strides by using a tool called CashOptix offered by TIS. And in a session this week, a treasury team member from GE Vernova detailed why they implemented the TIS solution.
- In a video running in next week’s newsletter, Bechtel Assistant Treasurer Dan Degagne will explain why he was surprised by the performance of a ML cash forecasting model the company developed. The video is from an upcoming Strategic Finance Lab podcast featuring Mr. Degagne and Shayly Nguyen, a Bechtel treasury fintech specialist.
However, NeuGroup’s 2022 Cash Forecasting Survey makes clear that most members have not yet made significant cash forecasting improvements. The survey found their biggest obstacle is a lack of visibility or predictability of future cash flows, cited by 88% of respondents. Many blame lack of access to cash data. And like the member posing the question below, many treasury professionals still rely exclusively on Excel spreadsheets.
Member question: “We are looking into ways to modernize our cash flow forecasting process. Currently we use Excel. What technology tools are you using for cash flow forecasting? Would you recommend them to others? Has anyone ever relied on Power BI for this?”
Peer answer 1: “Oh, how I remember the days of spreadsheets! Not fun and too much room for error! I would highly encourage a treasury management system (TMS). Although all systems have opportunities for improvement, our TMS has helped us improve our forecasting significantly.
- “It’s more beneficial to us in terms of short-term forecasting, but I think it has the capacity to improve long-term forecasting as well.”
The member who posed the question told NeuGroup Insights their treasury team is implementing a TMS but has found its cash flow modeling tool underwhelming. “There is also a difference between direct (usually short-term) and indirect (longer-term) modeling, which require different processes. The TMS tool seemed more focused on direct projections,” they said.
Surprise: Excel believers. The member communicated on this topic with about 15 other treasury practitioners and came away with an unexpected perspective. “I was surprised to learn that many companies do still use Excel very successfully for their cash flow modeling. I estimated that it could be 50% or even more,” they said.
- “People cited the ability to maintain full control over the modeling process and all the underlying assumptions, as well as the ease of running scenarios and sensitizing outputs. Some highlighted the challenge of getting buy-in around implementing new technology.”
- They added, “For the companies that have adopted a cash flow modeling platform, there was no one solution that seemed to be a leader in this space. Some were leveraging their TMS, some were using tools from banks, and some were using dedicated platforms.
- “My key takeaway is that no one tool dominates the market for cash flow forecasting for corporates—it’s still fragmented—which is not discussed extensively. I am not sure why this isn’t a hotter topic. I think it’s because Excel is still a perfectly good tool to fall back on (and essentially free).”
NeuGroup wants to know your views on how to transform and modernize cash flow forecasting and hear about your experiences with technology designed to improve accuracy and efficiency. Our goal is to share insights and help connect you directly with peers. Please send your thoughts, questions and comments to [email protected].
