Many treasurers struggle to predict their companies' future cash flows with accuracy, leaving room for improvement in this area. However, successful companies know that cash forecasting is crucial for funding day-to-day operations and meeting long-term investment objectives. In today's economic and regulatory environment, it's even more critical – for cash-rich companies as well as cash-poor. While technology can help to streamline the cash flow forecasting process, it is more important to have the right disciplines and processes in place.

While no forecast will ever be 100% accurate, it's important that the information included in the forecasting model is accurate, consistent and relevant. To achieve that, consider the following practices to help drive better forecasting results:

1. Keep an eye on the big picture

Knowing the company's strategic direction is essential. Understanding its operating companies — what is produced and sold — as well as details such as upcoming capital expenditures, tax payments and pension payments are all key components to include in a forecasting model. However, even if a model can accurately predict the company's receivables and purchasing figures, a forecast will mean nothing if the treasurer doesn't know that a $75 million acquisition is planned in two weeks' time. Ongoing communication with the entire forecasting team is critical for achieving the right level of detail to include in the forecast so that it can be easily understood and communicated to senior management.

Complete your profile to continue reading and get FREE access to Treasury & Risk, part of your ALM digital membership.

  • Critical Treasury & Risk information including in-depth analysis of treasury and finance best practices, case studies with corporate innovators, informative newsletters, educational webcasts and videos, and resources from industry leaders.
  • Exclusive discounts on ALM and Treasury & Risk events.
  • Access to other award-winning ALM websites including and

© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.