Microsoft takes great pride in running a centralized treasury for its more than 350 legal entities in 118 countries, which have over 1,100 bank accounts at more than 100 banks worldwide. Unlike many companies that forecast operating expenses by regional operating centers, the $70 billion technology company requires its more than 200 subsidiaries to forecast anticipated expenses every month. The result: net variances—forecast to reality—of 20% to 30%.
With more than $1 billion in capital flowing through its system each day, the wide variances resulted in over-forecasting by hundreds of millions of dollars, exposing Microsoft to heightened counterparty, country and fraud risk. "That is a lot of money, and we were determined to identify the issues causing it," says Jim Scurlock, senior manager of global cash planning at Microsoft.
Scurlock led the project to revamp the cash forecasting process to improve working capital. This was not easy given Microsoft's multiple subsidiaries and myriad banking relationships. Kickoff meetings with senior leaders ensured support from key stakeholders, in addition to available resources supporting a core project team headed by the leaders of the treasury and finance operations. "Because of our size and structure and the fact we are in so many countries, we needed senior leadership people from numerous organizations to ensure the right resources to effect change," Scurlock says.
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