A treasury team defining the dimensions of their cash forecast should consider questions including:

Reporting level: Can the forecast be matched to business accountability?
Currencies (and conversion rates to be used, if applicable): Is there a reporting threshold?
Reporting scale: Does the forecast effectively balance materiality vs. transparency?
Forecast time horizon: Does it provide enough forward visibility, while also aligning with decision-making activities such as the corporate investment horizon?
Forecast time buckets (e.g., first week by day, remainder by week): Is this granular enough to support finetuning management action and to meet other objectives?
Frequency of reforecast: Does this provide sufficient reaction time for changes?
Core forecast outputs (e.g., net liquid funds): Do the outputs relate directly to KPIs and accountability?
Component forecast line items: Do the included line items align with the business's main cash drivers, providing visibility over key indicators for remedial action where required?

Since the dynamics underlying the liquidity forecast will differ between organizations, the desired forecast outputs will likely be business-specific. However, treasury groups need to be sure to avoid the temptation of data overkill. For example, consider: Does the forecast need to be broken down by bank account, when cash concentration structures allow cash management at the pooling level? Too much unnecessary granularity can create inefficiencies, both in resources to support the process and in wasted effort if the information is not actually used.

Instant Insights /

It's Time to Review Liquidity Forecasting Fundamentals

Related Stories

Recommended For You