Cash-Flow Forecasting Still Vexing


Why is cash-flow forecasting still so frustrating for treasury departments?

By now, one would think finance departments would have made some improvements to the all-important task of cash-flow forecasting. But this year’s Global Corporate Treasury Benchmarking survey by PwC suggests otherwise. While a vital function of the treasury department, cash-flow forecasting is still a challenge, the survey suggests, with more than half of 220 finance executives surveyed concerned about the accuracy of their forecasts, collecting forecast inputs on time, and the reliability of the systems and processes used to gather the data.

“Treasury forecasting is still a cumbersome, manual, and spreadsheet-based process involving many people from across the organization, resulting in monthly or quarterly, rather than weekly, updates,” said PwC in its report.

According to the survey results, 53% of the respondents are still only updating cash flow forecasts monthly; 23% update them quarterly; and 15% update them weekly.

Forecast horizons vary: 27% forecast the current budget year, 25% the current quarter, and 19% the current month. Almost a quarter of respondents (22%) use a 12-month rolling forecast.

Concerns over the accuracy of forecasts may be related to the granularity of inputs. Most companies “have forecasting reports only at a consolidated level using monthly input numbers at the transaction type level,” explains PwC. “Less than 6% of the respondents make use of the inputs at the transactional level.”

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