Cash Flow Forecasting: the need is real

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Cash Flow Forecasting: the need is real

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Grant Thornton, an ACA partner, recently published a very thorough study prepared by Carl Civadiée and Stéphanie Hauswald. Previous editions of their Barometer survey report had highlighted Working Capital Requirements (WCR) as a major concern for businesses. The latest edition focuses on Cash Management as another essential issue. We’ve summarised the key points in a few figures that offer plenty of food for thought.

A good source of insight into how your business is positioned as 2020 begins…

An important financial target

No fewer than 7,650 CFOs, Treasurers, CEOs, and Credit Managers participated in this barometer report, which turned out to reflect certain shared interests, including expectations and issues around cash forecasting exercises.

Cash forecasting issues were very important to survey respondents. Two main goals were raised by the panel with equal importance (69% of the panel): establishing action plans for WCR, and engaging in cash arbitrage.

Not all good news in the survey

Here’s a summary of key figures from the study:


This study perfectly reflects the situation of the Treasurers and CFOs we’re currently meeting with. 

  • Yes, cash flow forecasting has joined the list of Treasurers’ and CFOs’ most essential missions. 
  • No, cash flow forecasts are not that easy to set up.

> Forecasting period: mainly 12 months.

It’s interesting to note that 34% of businesses only prepare forecasts for a 12-month period.

Grant Thornton summarises what’s useful about this time frame: ‘The purpose of a 12-month forecast is to predict the company’s overall financing needs with regard to its growth projects, while a 3-month forecasting window is used to understand the needs of the operating cycle (notably WCR). Finally, a 1-month forecast is focused on short-term cash flow arbitrage operations, e.g. in connection with a cash pool.’

Just 6% of the panel use forecasting for all three periods: 12 months, 3 months and 1 month. Why? Because forecasting becomes complicated when using all three, especially in terms of the cash-based actions to be taken…

> Updating forecasts: mainly on a monthly basis

Monthly updates to cash flow forecasts are the most popular approach, favoured by 44% of respondents.

The reliability of a company’s forecasts depends on monthly updates, even for 12-month forecasts. But although these updates need to incorporate both accounting and budget data, those data are not necessarily available and/or implementable in the model being used.

We should note, however, that daily updates are more relevant for the bank account projections prepared by the Treasurer

Still hooked on Excel

It’s no surprise that Excel is still the leading tool for preparing forecasts. It’s useful for calibrating and specifying the reference parameters that can be implemented in a digital cash flow forecasting system. Even so, 84% of respondents said they aren’t satisfied with their model as a tool for managing forecasts.

It’s true: Excel is an excellent spreadsheet program, but it is NOT a modelling tool. 

The other pain points mentioned were, in order of importance: the weakness of the method in use, availability of accounting information, and the complexity of modelling in relation to the business activity. Also mentioned were a lack of dedicated time, an inadequate budget process, or a lack of available expert resources.

Key expectations

According to the study, the primary goal of cash flow forecasting is to establish action plans for WCR (69%) and to engage in cash arbitrage (69%).

In parallel, forecasting also helps to support relationships with banking partners (38%) and make investment decisions (34%).

‘This new edition of our barometer report highlights the acute need for companies to put a robust cash flow forecasting tool in place to support their growth strategy,’ notes Carl Civadiée, WCR & Cash Management Partner, Grant Thornton.

Final thoughts

Only 13% of businesses use a professional cash flow forecasting tool. Of course, setting up forecasts isn’t something a business can do in one shot. It’s a project that needs to be structured from the top down in order to facilitate regular monthly reporting based on up-to-date data and a well-established method.

Our thanks to Grant Thornton for our high-quality discussions and our consistently rewarding partnership.

We encourage you to read the 2019 Cash Management barometer report.

Have you got the right tools for the job?

  • To keep tight control of your WCR and set up actions: Cash Modeling is the market solution for cash flow, debt and balance sheet forecasting

To monitor your provisional bank account balances: Thétys Tréso is a TMS tool that helps treasurers to monitor their daily cash flow.

Interested in a demo of our solutions?