From the June 2010 issue of Treasury & Risk magazine

Working on the Cash Train

Companies like Amtrak are tracking more granular information on more factors affecting cash flow and how they correlate.

On good days, the trains run on time, but every day the cash forecast arrives on schedule at $2.4 billion Amtrak, the Washington-based passenger rail service. Amtrak takes forecasting seriously. For example, if the price of diesel fuel jumps 50 cents a gallon in the futures market, that information goes into a home-built spreadsheet and then a forecasting model. The rise in the cost of diesel will increase what Amtrak pays to run its trains, explains treasurer Dale Stein, so the model revises the expense forecast to show how that is likely to increase cash outflows.

Amtrak also knows from experience that if gasoline prices are rising along with diesel, and if gas prices rise far enough and fast enough, people will ride trains more. So, further out in the future, the revenue forecast is adjusted to include that probable gain. The forecasting system ultimately nets out the higher cost of the fuel and the increase in fares to show the probable impact on Amtrak's cash flow, Stein says.

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