DOCSLIB.ORG

Getting More from Your Technology to Master Cash Forecasting

Total Page：16

File Type：pdf, Size：1020Kb

Download full-text PDF Read full-text
Getting More from Your Technology to Master Cash Forecasting Getting More From Your Technology to Master Cash Forecasting Marci Lerner, Jeff Diorio, Ed Barrie, Treasurer Director Director Hologic Treasury Strategies Tableau Agenda Framing Forecasting – Influences – Challenges – Approach Treasury Case Study: Hologic Technology Case Study: Tableau Forecasting Best Practices Forecasting Influences, Challenges and Approach 2019 Survey Results Results of interviews of 30 Treasurers put Forecasting improvement as the top item on their to-do list for 2019. Results of online survey of 400 Treasury users indicated Forecasting was #2 item they were focused on and #3 on list of knowing what their peers did. Rank Rank Rank Rank Rank Rank OPPORTUNITIES BENCHMARKING 2019 2018 2017 2019 2018 2017 Working capital management 1 - - Bank service fees 1 1 1 Cash forecasting 2 3 4 Bank relationship management 2 5 7 Financial risk management, FX and 3 1 1 Cash forecasting 3 4 8 IR Bank relationship management 4 5 3 Best practices 4 2 3 Treasury staffing levels and skill 5 8 8 Treasury staffing and skill Levels 5 6 4 sets Why forecast HIGH LEVEL BLUEPRINT OF COMPANY’S FINANCIAL FUTURE • Ensure access to adequate capital – cash and credit » Short-term → Liquidity planning [Treasury] » Long-term → Capital planning [FP&A] • Ensure effective working capital management: Is cash effectively deployed? • Effectively manage risk: Where are we exposed in terms of changing interest rates? • Design a capital structure that supports business plan • Anticipate impact on earnings, profits, EPS Why are there Barriers to Overcome? A majority of organizations indicate they are “less-than-satisfied” with their cash forecasting processes and forecast accuracy Many organizations face the same kinds of forecasting challenges Low interest environment led to benign neglect Issues Treasury and Finance Users Note •Insufficient resources •Ineffective forecast methodology, tools •Poor information access/exchange •Poor internal knowledge of cash flows •GIGO (accurate data sources) •Low priority by senior management •Inconsistency between short-term cash •Organizational complexity forecast and budget Budget vs liquidity RECONCILING BUDGET CASH WITH LIQUIDITY CASH IS DIFFICULT – THERE ARE DIFFERENCES BUDGET LIQUIDITY Pro Forma Financials Manage Liquidity GAAP Accounting Actual Cash Ledger Balances Available Balances Long-Term (1–5 yrs) Less than 1 year Periodic Updates Frequent Updates Different goals Different perspective Different measure of cash Different time horizon Different schedule Treasury can have multiple forecasts / time horizons They should be linked, but all have different objectives and uses LONG TERM MEDIUM TERM NEAR TERM Objectives: Objectives: Objectives: Daily cash positioning Liquidity planning, borrowing Long-term capital management Invest/borrow decisions decisions and earnings protection Horizon: Horizon: Horizon: 1–4 weeks 13–18 weeks 12–18 months Detail: Detail: Detail: Most granular, account level Medium Summary level detail; focus on details balance sheet, business Frequency: categories Frequency: Weekly Daily Frequency: Update: Update: Monthly or Quarterly Weekly Intraday, as needed Update: Monthly Spreadsheet Limitations SPREADSHEETS ARE EASY…WHEN YOUR FORECAST IS EASY Become less effective when integrating data sources Domestic Cash Forecast 7/14/14 7/15/14 7/16/14 7/17/14 7/18/14 7/21/14 7/22/14 Mon Tue Wed Thu Fri Mon Tue Not truly multi-user Beginning Balance (MMF) 582.00 598.49 1037.44 1283.22 554.96 515.13 536.16 Cash Activity Expected Receivables 46.49 104.95 0.78 2.74 0.17 51.03 165.33 Expected Payables (30.00) (30.00) (30.00) (30.00) (30.00) (30.00) (30.00) – Lack controls Expected Payroll (50.00) (10.00) Netting Payments/Receipts (651.00) Treasury Wires (11.00) (100.00) – Lack audit trails IC Payments/Receipts Borrowing Activity CP Maturing (125.00) (125.00) Difficult to compare versions CP Issuance 500.00 500.00 Ending Balance 598.49 1037.44 1283.22 554.96 515.13 536.16 671.49 – e.g. variance analysis CP Outstanding (250.00) (625.00) (1000.00) (1000.00) (1000.00) (1000.00) (1000.00) All balances are in MM But most organizations forecast using spreadsheets Treasury Case Study: Hologic Company Overview COMPANY PROFILE • Hologic is an innovative medical technology company primarily focused on improving women's health and well-being through early detection and treatment • We are the leader in 3-D Mammography and Cervical Cancer screening The Company operates five core business units focused on breast health, diagnostic testing, GYN surgical, skeletal health and medical aesthetics • $3 billion revenue, $12 billion market cap, global publicly-traded company headquartered in Marlborough, MA Forecast Strategy Hologic Cash Flow Forecasting Strategy Why is Cash Flow Forecasting so important? Treasury’s #1 job is to provide the right amount of cash, in the right currency, in the right entity, at the right time, to support the business Goals Solution Result • To forecast future cash flow in order • Reval treasury management system • Short-term daily direct US cash to support short-term and long-term • Create multiple detailed cash forecast allows us to avoid cash business needs forecasts to identify future cash surprises and have funds readily • To ensure sufficient near-term needs available liquidity is in place to meet • Weekly and monthly direct US cash • Identify key variables, assumptions operational and strategic cash and stakeholders driving cash trends forecast and long-term indirect needs and variances global forecast help to identify • To highlight a borrowing need in liquidity risks and opportunities to • Monitor and analyze how the advance the business business is performing • Forecasting cycle and process helps • Monitor accuracy of cash flow to improve coordination between forecasting and make improvements Treasury and other departments - eliminates surprises Forecast Process Forecasting Cycle Hologic Treasury leads an engaging process with the Business to create our multiple cash forecasts Our TMS system is one database integrating all modules to report all Treasury transactions across the Company and around the globe US Direct CF US Short-Term Direct Cash Flow Forecast 3/11/2019 - 3/15/2019 USD ACTUAL FORECAST FORECAST FORECAST FORECAST We utilize Reval TMS – an automated SAS treasury system, for Monday Tuesday Wednesday Thursday Friday our Cash Flow forecasting process: Opening Balances 78,000,000 87,000,000 98,000,000 85,000,000 82,000,000 Operating Cashflows • Bank statements are automatically uploaded into Reval on a daily basis Receipts 12,000,000 16,000,000 16,000,000 16,000,000 16,000,000 from our main operating bank Total Receipts 12,000,000 16,000,000 16,000,000 16,000,000 16,000,000 Disbursements • Reconciliation occurs between the Reval bank activity and the bank Total Vendor & Tax Payments (3,000,000) (2,000,000) (17,000,000) (1,000,000) (25,000,000) statements Total Payroll/Benefits - - (12,000,000) (18,000,000) - • Bank transactions are automatically categorized through Reval based on Total Interest Expense - - - - - CTR’s (cash transaction reason) allowing the transactions to flow into Total Intercompany - (3,000,000) - - - the correct cash flow buckets Total Interest Income/Bank Fees - - - - - • Export daily bank activity out of Reval and into Excel and use that export Sweeps/Funding - - - - - to update our weekly cash forecast template (pictured to the right) Total Hedges - - - - - • A daily email is sent out to the Treasury team indicating where we Total Other - - - - - currently stand with cash and what we expect our end of the week Total MMDA Investments - - - - - balance will be Total Operational Cashflows 9,000,000 11,000,000 (13,000,000) (3,000,000) (9,000,000) Provides a daily view of bank activity and US liquidity - Actuals Non Operational Cashflows and Forecast Total Stock Options & RSU's - - - - - Identifies where we currently stand with cash Total Debt Principal Payments - - - - - • Should we: Total Stock Repurchase - - - - - • Invest cash Total Investments - - - - - Total Other - - - - - • Pay down debt Total Non Operational Cashflows - - - - - Borrow more • Calculated Ending Balances 87,000,000 98,000,000 85,000,000 82,000,000 73,000,000 Cash Increase/(Decrease) 9,000,000 11,000,000 (13,000,000) (3,000,000) (9,000,000) US Direct CF US Short-Term Direct Cash Forecast – Continued Current Day Cash Balances Breakdown • As part of a daily US cash Total Balance as of 03.11.19 = email, we also describe $170M cash by geography and investment account UK, $60 LATAM, $10 Other, $30 Other, $5 • This data is from Reval, US, $80 Canada, and the snapshot can be $15 pulled at anytime • Data is automatically updated 3 times a day for current day bank activity US Direct CF US Weekly/Monthly Direct Cash Flow Forecasting ACTUAL ACTUAL FORECAST FORECAST FORECAST Q2 Q2 CWQ2 CWQ2 Q2 CW 2/24/2019- CW 3/3/2019- 3/10/2019- 3/17/2019- CW 3/24/2019- Export prior week actuals out of Reval into Excel every 2/24/2019 - 3/30/2019 USD 3/2/2019 3/9/2019 3/16/2019 3/23/2019 3/30/2019 Tuesday morning Opening Balances 81,800,000 79,300,000 78,000,000 76,300,000 79,500,000 Operating Cashflows Update weekly/monthly cash forecast template in Total Receipts 75,000,000 72,000,000 76,000,000 76,000,000 86,000,000 Disbursements Excel and adjust for known forecast developments Total Vendor & Tax Payments (51,000,000) (42,000,000) (42,000,000) (38,000,000) (38,000,000) Load forecast back into Reval to ensure that the Total Payroll/Benefits (32,000,000) (8,000,000) (30,000,000) (5,000,000) (30,000,000) system is updated Total Interest Expense - - (1,000,000) 200,000 - Total Intercompany (5,000,000) 2,500,000 (4,700,000) - - Early indicator of Free Cash Flow for CFO at quarter- Total Interest Income/Bank Fees - - - - end 2 weeks before we get the “official numbers” from Sweeps/Funding - - - - - Corporate Accounting Total Hedges - - - - 300,000 Total Other 9,500,000 3,200,000 - - 2,800,000 Perform trending analysis around major operating Total MMDA Investments - (30,000,000) - (30,000,000) (20,000,000) items (next page) to stress test the forecast Total Operational Cashflows (3,500,000) (2,300,000) (1,700,000) 3,200,000 1,100,000 Approx.
Load more

Recommended publications
  • Retail Store Cash Flow Spreadsheet
    Retail Store Cash Flow Spreadsheet Which Pennie tremblings so journalistically that Bertie tallows her diamagnetism? Glued and eastbound UnqualifiableBobbie side-slips and herquantifiable accounting Waldon shrugged still bumper while Orazio his laconicism mismarry loud. some gangers inoffensively. 9 reasons why your heavy flow when is where accurate Blog. This template will brief you job track of your best cash totals and fluffy you. Master your flow statements master your book's cash flow. A cash and forecast year in let a cashbook that projects you slay your. Business templates and tools Small Business. Retail Industry Financial Models FinModelsLab. How much profit and income so when it will take your cash flow statement of. Management of cash flows of large distribution Shop Lab Excel. The retailers terms often to be the Net 3060 or 90 day terms. How easily Create a Pro Forma Cash only For tender Business. Example case a Retail the Cash Flow Statement. A Beginner's Guide to Forecasting Business should Flow for. The financial models like commission models are used to as a. Use this summary flow statement template to trumpet your cash change for water next. Is half great attribute for ownersCFOs of retail supply to forecast cashflow. Medical and recreational cannabis sales forecast billion. Retailers use the hate flow statement to portray and monitor the inflows and. Supplemental Info Balance Sheet Changes Operating Activities Adjustments. Operating Activities Definition Investopedia. Retail budget template is an efficient-inclusive Excel template for retailers. Grocery your Business Financial Model eFinancialModels. Retail order flow Google Search Business planning How to.
    [Show full text]
  • Coronavirus Cash Flow Crib Sheet Cash flow Is Going to Be Top of the Small Business To-Do List for at Least the Next 12 Months
    Coronavirus Cash Flow Crib Sheet Cash flow is going to be top of the small business to-do list for at least the next 12 months. But is your planning detailed enough to support the big decisions you’re going to have to make? It’s never too late to revisit best practice, so take a quick look at the steps below and see what you can do sharpen up your cash flow forecasting. Use a rolling Get the best estimate of liquidity over an unpredictable forecast year and beyond Estimate the likelihood/severity Anticipate of big gaps and plan for crunch points each scenario With the situation changing Update it so fast, look at your forecasts more oen weekly or daily If you're sailing close to the Include every wind, the small costs can penny tip you over the edge Diversify into new product Iron out seasonal lines, new customer segments variation or channels Add a credit card link to your Make payment invoices or switch customers easy to direct debits Have consequences for late Make terms payment and incentives for unmissable early payment Just a few regulars can Oer retainers smooth cash flow and avoid an end-of-month scramble Be strict about the timing Escalate debt and stages of your debt collection process Understanding their cash Health check situation gives you a more suppliers realistic view of yours Check credit rating and key Choose partners financials for critical suppliers wisely and customers Work with fast Even if that means smaller projects or slimmer margins. payers And invoice fast Train up someone else in your Get support business to keep an eye on daily credits and debits Take the cash flow figures into Make it a team thing management meetings and make them a focus Keep your bank Tell them about any unexpected changes in in the loop your cash flow forecast Karen Emanuel, CEO of Key“ Production Go back to your data to anchor predictions “Forecast early and forecast detail.
    [Show full text]
  • Preparing a Short-Term Cash Flow Forecast
    Preparing a short-term What is a short-term cash How does a short-term cash flow forecast and why is it flow forecast differ from a cash flow forecast important? budget or business plan? 27 April 2020 The COVID-19 crisis has brought the importance of cash flow A short-term cash flow forecast is a forecast of the The income statement or profit and loss account forecasting and management into sharp focus for businesses. cash you have, the cash you expect to receive and in a budget or business plan includes non-cash the cash you expect to pay out of your business over accounting items such as depreciation and accruals This document explores the importance of forecasting, explains a certain period, typically 13 weeks. Fundamentally, for various expenses. The forecast cash flow how it differs from a budget or business plan and offers it’s about having good enough information to give statement contained in these plans is derived from practical tips for preparing a short-term cash flow forecast. you time and money to make the right business the forecast income statement and balance sheet decisions. on an indirect basis and shows the broad categories You can also access this information in podcast form here. of where cash is generated and where cash is spent. Forecasts are important because: They are produced on a monthly or quarterly basis. • They provide visibility of your future cash position In contrast, a short-term cash flow forecast: and highlight if and when your cash position is going to be tight.
    [Show full text]
  • Relevance of Goodwill Impairments to Cash Flow Prediction and Forecasting
    Relevance of Goodwill Impairments to Cash Flow Prediction and Forecasting Eric D. Bostwick, Kevin Krieger, and Sherwood Lane Lambert Abstract This study examines the contribution of goodwill impairment information to the prediction and forecasting of future operating cash flows. Extending the framework of Barth, Cram, and Nelson, we find that explicitly including goodwill impairments incrementally improves 1-year-ahead cash flow prediction and forecasting. Improved cash flow forecasting is present over the entire 2001-2009 study period as well as for each year within the study window. In addition, goodwill impairments retain their significance and predictive power when other non-recurring charges (e.g., restructuring, asset write-downs, and merger and acquisition costs) are added to the model, both individually and aggregately, and when market-related information (i.e., change in market capitalization) is included in the model. While these findings are validated by in-sample prediction techniques, this study is also one of only a few studies to investigate the incremental, out-of-sample predictive power of noncurrent accruals on reported (as opposed to computed) operating cash flows. Analysts, investors, creditors, and others interested in future cash flows should separately consider goodwill impairment information, when available, to improve the accuracy of cash flow prediction and forecasting. Keywords: goodwill impairments, cash flow forecasting, cash flow prediction, non-recurring charges 1 I. Introduction The accounting profession has long recognized that cash flow prediction is one of the fundamental uses of financial information, and this construct provided much of the rationale for the passage of Statement of Financial Accounting Standard No. 142, Goodwill and Other Intangible Assets (SFAS No.
    [Show full text]
  • Budget Preparation & Cash Flow Forecasting
    AMANS NSMFC FMCBC Core Best Practice Approved 2013 Financial Forecasting: Budget Preparation & Cash Flow Forecasting In 2013, the Financial Management Best Practice Committee (FMCBC) was reconvened to identify core financial best practices for municipalities in Nova Scotia. The committee suggested that the Financial Forecasting in the Budget Preparation Process and the Cash Flow Forecasting policy be combined under a new heading: Financial Forecasting. The attached policies both cover important aspects of financial forecasting for municipalities in Nova Scotia. The committee recognized that cash flow forecasting may be difficult in municipalities that have limited staff resources. FMCBC Core Best Practice: Financial Forecasting: Budget Preparation & Cash Flow Forecasting, Page 1 AMANS NSMFC FMCBC Core Best Practice Approved 2013 Financial Forecasting in the Budget Preparation Process The original recommended practice was developed by the Government Finance Officers Association (GFOA). Some aspects of the practice have been revised by the Financial Management Capacity Building Committee (FMCBC) for use by Nova Scotia municipal governments. The original GFOA recommended practice is Financial Forecasting in the Budget Preparation Process, approved by the Committee on Canadian Issues in 2001. Recommendation The GFOA recommends that governments at all levels forecast major revenues and expenditures. Following the GFOA’s recommendation, the FMCBC recommends that as part of the budget process local governments forecast all major revenue and expense items. Purpose Forecasting of major revenue and expense items allows municipalities to predict the impacts (both short and long term) of current and proposed policies. The ability to predict impacts allows a government to plan for those events. The forecast, along with its underlying assumptions and methodology, should be clearly stated and made available to participants in the budget process and stated in the final budget document.
    [Show full text]
  • Cash Flow Forecasting
    Cash flow forecasting This document walks you through the Cash overview analytical workspaces. These workspaces provide analytical reports that can help you understand upcoming cash flow and currency requirements. Demo script November 2017 Send feedback. Learn more about Finance and Operations. Dynamics 365 for Finance and Operations, Enterprise edition Cash flow forecasting You can use the cash flow forecasting tools to analyze upcoming cash flow and currency requirements, so that you can estimate the company’s future cash requirements. This document walks you through the Cash overview analytical workspaces. These workspaces provide analytical reports that can help you understand upcoming cash flow and currency requirements. Important: This demo script assumes that you are running data created from the demo data packages that were released with Microsoft Dynamics 365 for Finance and Operations, Enterprise edition 7.3. It is not intended for use with the demo data companies, such as USMF and DEMF, that also ship with the product. For more information about the demo data packages, see Generate demo data by using packages. Notes, open items, and questions ● These data packages are required: SystemAndShared, Financials - HQUS, and Financials - HQEU ● Sign in as this user: Sara ● Use this legal entity: HQUS Additional setup that is required 1 In the HQUS legal entity, follow these steps: a Select Cash and bank management > Cash flow forecasting > Calculate cash flow forecasts. b Set the Cash flow forecast calculation method field to Total. c Select OK. 2 In the HQEU legal entity, follow these steps: a Select Cash and bank management > Cash flow forecasting > Calculate cash flow forecasts.
    [Show full text]
  • Chapter 7 Earnings and Cash Flow Analysis End of Chapter Questions and Problems
    CHAPTER 7 Earnings and Cash Flow Analysis Cash flow is a company’s lifeblood, and for a healthy company the primary source of cash flow is earnings. Little wonder that security analysts are obsessed with both. Their goal is to predict future earnings and cash flow. An analyst who predicts well has a head start in knowing which stocks will go up and which stocks will go down. In the previous chapter, we examined some important concepts of stock analysis and valuation. Here, we probe deeper into the topic of common stock valuation through an analysis of earnings and cash flow. In particular, we focus on earnings and cash flow forecasting. This chapter, will acquaint you with financial accounting concepts necessary to understand basic financial statements and perform earnings and cash flow analysis using these financial statements. You may not become an expert analyst yet - this requires experience. But you will have a grasp of the fundamentals, which is a good start. Unfortunately, most investors have difficulty reading financial statements and instead rely on various secondary sources of financial information. Of course, this is good for those involved with publishing secondary financial information. Bear in mind, however, that no one is paid well just for reading such sources of financial information. By reading this chapter, you take an important step toward becoming financial-statement literate, and an extra course in financial accounting is also helpful. But ultimately you learn to read financial statements by reading financial statements! Like a good game of golf or tennis, financial-statement reading skills require practice.
    [Show full text]
  • Receipt Bank Cash Flow Guide
    CASH FLOW SURVIVAL GUIDE STEPS TO TURNING THE TIDE Receipt Bank Guides NOTHING IS CERTAIN IN BUSINESS OR IN LIFE. CRISIS OR NOT, CREATING POSITIVE CASH FLOW IS AN ESSENTIAL FOR ANY ENTERPRISE AND CAN BE ONE OF THE TOUGHEST HURDLES TO GET OVER. MANY SMBS STRUGGLE TO SURVIVE DUE TO LACK OF CASH FLOW UNDERSTANDING. In this guide, we gathered advice and strategies from experts within the wider accounting and bookkeeping industry. It starts with keeping a finger on your financial pulse and taking a granular look at your income and expenditure. Here are the two ways any business can manage their finances and gain clarity over their cash flow. We will dive into cash flow statements to better understand where you’ve been, then explore cash flow forecasting so your business can know where it's headed. Walk away from this guide with the know-how and knowledge needed to: • Understand your cash flow • Modernise your systems • Manage the unexpected Let’s begin. PAIN POINT SOLUTION Not enough visibility over your own Put it all in one digital place. expenses Start building a cloud accounting app Don’t have the right financial tools to stack, use software that integrates with tackle data your general ledger. Run more profit and loss reports using Limited view of financial health real time financial data. Use a cash flow statement and Not enough cash flow throughout the forecasting system to determine your year for a rainy day position now and in the future. Cash Flow Survival Guide 2020 3 FIRST THINGS FIRST: KNOW YOUR POSITION Businesses are often born from a passion, but for many owners, that isn’t always accounting or bookkeeping.
    [Show full text]
  • A Study on the Relationship Between Analysts' Cash Flow Forecasts
    sustainability Article A Study on the Relationship between Analysts’ Cash Flow Forecasts Issuance and Accounting Information: Evidence from Korea Hyun Min Oh 1 and Ho young Shin 2,* 1 Department of Accounting, College of Social Sciences, Sunchon National University, Jeonnam 57922, Korea; [email protected] 2 School of Business, Hanyang University, Seoul 04763, Korea * Correspondence: [email protected] Received: 18 May 2019; Accepted: 17 June 2019; Published: 20 June 2019 Abstract: This study analyzes the relationship between the future cash flow forecast information provided by financial analysts and accounting information. We examine whether the joint issuance of financial analyst earnings forecasts and cash flow forecasts from 2011 to 2015 contributes to the information usefulness of Korean listed firms. The empirical results of this study are as follows. First, the issuance of analysts’ cash flow forecasts and earnings forecast accuracy were significant positive values. Cash flow forecast accuracy and earnings forecast accuracy were significant positive values. Second, the issuance of analysts’ cash flow forecasts and buy–sell bid spread are significant negative values. These results show that the information asymmetry between the manager and the investor can be reduced based on the rich information environment. This study suggests that cash flow forecasting information of financial analysts provides important evidence for capital market participants because it provides evidence that capital market participants’ information can be used as useful information for economic decision-making. These results show the sustainability of a firm from the viewpoint of a financial analyst who acts as an intermediary and external supervisor in the capital market.
    [Show full text]
  • Budgets, Cash Flow Forecasting and Management Accounts
    Budgets, Cash Flow Forecasting and Management Accounts Andrew O’Brien What does Finance do? SUPPORTING DECISIONS CONTROL ANALYSIS AND REPORTING PROCESSING TRANSACTIONS What is a budget? Translation of your Plan into monetary terms: What resources What are we How much will do we need to planning to do? they cost? do it? Can we afford to Where will the deliver that money come plan? from Why would you do a budget? • Organisations need a clear plan – doing a proper budget makes you check if you can afford to deliver it • Helps to allocate resources to organisation’s priorities • Tool for tracking performance • Requirement for funders When to do your budget • Takes longer than you think • Consultation • Drafting • Negotiation (& redrafting) • Approval • Good Practice • Organisational budget approved 3 months before start of year – allow 4 wks to prepare • Project budget – allow 2 wks+ to prepare Who should do the budget? • People responsible for doing the work • Get people involved • What is Finance’s role? • Manage the process • Technical resource • Check and balance How do you start to write a budget? Start with the plan – what is the organisation going to do? Identify who is responsible for the different areas Help managers to work out what resources they will need for each team/project and what that will cost Ask them to identify where the money is going to come from! How do you predict income? • Similar process • Critical assessment of current experience • For new income – research the market/similar projects • Always tricky to know how
    [Show full text]
  • Cash Flow: Managing Liquidity in Uncertain Economic Times
    2020 Deloitte Power & Utilities Conference Knowledge to thrive December 2, 2020 Cash flow: Managing liquidity in uncertain economic times Michael Epstein, Principal, Deloitte Transactions and Business Analytics LLP Matt Lew, Senior Manager, Deloitte Transactions and Business Analytics LLP Agenda Cash Flow Culture 5 • Liquidity as an after-thought 6 • Building a framework of active cash management 7 • Roadmap to a cash driven culture 8 • Pillars of cash culture 10 • Key learnings 11 Cash Flow Forecasting 12 • Basics of direct cash flow forecasting model 14 • Benefits and approach 15 • Modeling fundamentals 16 • Reporting and analysis 18 • Stages of deployment 21 • Key learnings and pain points 23 Copyright © 2020 Deloitte Development LLC. All rights reserved. 2020 Deloitte Power & Utilities Conference 3 Polling question #1 Which executive manages cash and liquidity within your organization? • CAO • CFO • Treasurer • Other • No one formally owns it • Don’t know/not applicable Copyright © 2020 Deloitte Development LLC. All rights reserved. 2020 Deloitte Power & Utilities Conference 4 Cash Flow Culture Copyright © 2020 Deloitte Development LLC. All rights reserved. 2020 Deloitte Power & Utilities Conference 5 Liquidity typically only gets the attention when there is very little left Prioritizing liquidity means changing the culture throughout the organization – balance sheets and income statements are distorted; cash flow is reality. Cash enables business operations …but is rarely thoroughly understood …until it puts the entire business at risk. • Cash is required to fund the business: • Cash is often viewed and siloed into ‘Treasury’. • In cases where companies can remain in business, they − Inventory, Raw Materials and Production • Management and stakeholder emphasis is typically on the often fall victim to: − Employees & Contractors Profit and Loss (P&L).
    [Show full text]
  • Smart Cash Flow Forecasting
    Smart Cash Flow Forecasting By Ronald F. DeSoiza, CPA, Partner and Eric Gelb, CPA, Director Financial executives and managers use cash flow forecasting as a tool to manage their business and project investment rates of return. In a “normal” business environment, often they run forecasts quarterly or annually and operating history is often a good guide. But in a “COVID-19 World,” cash becomes dear and there’s a domino effect. In addition, many executives are finding it difficult to forecast the duration of this crisis and its tail. As financial professionals know, revenue under accrual accounting does not necessarily translate into cash. And of course, an organization has more control over when it times its payments than when its customers pay. During a crisis, it’s even more prudent to protect your cash. Be more conservative than usual with paying your bills and assume your customers will delay payment to you. Take extra steps to control your cash to avoid going into default on your debt and other obligations. Consider these action steps to create a dynamic cash flow forecast to help you manage through these challenging times and create positive working capital: 1. Analyze Your Cash Flow Forecast. Often, a monthly forecast is sufficient, but under a potential “cash squeeze,” a weekly or even daily forecast could be more valuable. • If you create a monthly forecast, you can check your demand deposit account (DDA) balance daily to determine whether to withhold payments. Adjust your forecast to take into account deferring payment of expenses, which impacts your cash balances.
    [Show full text]