Avoiding the Consequence of Inaccurate Forecasting: Visibility, Collaboration and AI

Speakers

Jamie Munnik

Assistant Controller,
Johnsonville

Ernie Humphrey

CEO,
TreasuryWebinars

Transcript

[0:00] Announcer:

Thank you all for joining today’s session on how to gain visibility of cash and improve collaboration with AI. Today, we have with us Jamie Munnik, assistant controller at Johnsonville & Ernie Humphrey currently serves as the CEO of Treasury webinars. And as the CEO of 360 thought leadership consulting. We have Charity here with us who are going to circulate the signboard and you know what to do, you just need to put your name and email address on it. It will help you gain one credit for CTB recertification. So, Jamie and Ernie, the stage is all yours. Thank you.

[0:37] Ernie Humphrey:

Thank you so much, sir. And thank you, everyone, so much for waking up with us this morning. And thank you to Jamie for being brave enough to speak with me. So that’s a lot to handle. So I think we have a unique session today. Because usually, when we have practitioners, so I talked about theory, we’re talking to someone that is like they’re at the end of the journey. And so Jamie’s a little bit, the beginning of the journey. So earlier in the conference, they’re like, way out at the forefront of AR technology. And they’re like the case study of HighRadius. And now it’s neat to see them start to say, “Okay, let’s start to look at cash forecasting”. So she’s going to share with us kind of where they’re at what they’re looking at. So I’ll tell you some of the challenges that I see from a theory, but we’ll get Jamie’s direct input. And then I think it’s fascinating that she’s willing to share. I have probably spoken 500 times, and I’ve never had the opportunity to share and I love you here. I hope we can converse. But I was hoping to have a conversation because when I was at the beginning of my journey, I’d like to talk to someone kind of like we’re in the same place. And so I think it’ll be very enlightening. And I asked Jamie if she wants to say something, you got to just tell me to be quiet because I talked too much.

[1:59] Ernie Humphrey:

So just the agenda. So one of the things that we’ll talk about upfront is just some of the consequences of forecasting. And, you can say cash forecasting, but we need to collaborate across the enterprise. So let’s look at any type of forecasting we’re doing for data inputs for budget and planning. And so those will also help us understand the value that we can offer across the enterprise from Treasury. So we’ll talk about the budget and forecasting and we’ll talk to Jamie a little bit about how they do it, what works, what doesn’t and point out to some of the challenges. I’ll bring Jamie in and ask her what she’s seeing and then maybe, what do they hope to do going forward. And then we’ll talk about forecasting and cash management. Cash forecasting is done, which is kind of two parts for me, always the theory so I can tell you that theory, and then we’ll look at him practicing a little bit. Some of these slides you may have seen from because HighRadius is my partner, but so like that, I think it’s cool to see the day in the life of the treasure and the daily impact of looking at that. And then we’ll give you some closing thoughts and some specific recommendations.

[3:16] Ernie Humphrey:

All right, so, budget and forecasting. So we’ll have a little humor here. Don’t tell Dilbert, I’m going to get copyright infringement. But so here’s our budget. I need your budget estimate today. We won’t have useful numbers until next week. It doesn’t work that way. No, as soon as he asked the question, his boss went into hibernation. So, the gist of this is, people go into hibernation, it goes on your CFO. And so do they want to hear the details or the number? He tells them what they want to hear. So it’s kind of that budget process. So he can’t wait to hear anything until we say a number. $3 million brain goes on 3 million. Good work. The first time I saw it, I panicked and ended up with a budget of $911. So part of the gist of that is there’s almost a fear of budgeting, right? Who hates to be involved in budgeting? Me. So, as we’re more involved in that, we have to kind of get away from that. But if we have to engage our stakeholders to look at this as an opportunity, rather than as a chore. So how do we teach folks to earn more of the budget, rather than I’m going to raise my budget by 6%? Pray, they don’t cut my budget. So that collaboration process. I think this is enlightening to me. Because as you talk to your folks, and you go to conferences, and there’s a lot of people that are smarter than me, but they don’t know the difference between this when they talk, budget is what you would like to happen.

[5:00] Ernie Humphrey:

The plan is how you’re going to make it happen. And your forecast is what you think is going to happen. So I think we get confused between the plan and the forecast. So you might not like the forecast. But you have to let the data tell you what’s going to happen. And then you use that to how are you going to make it happen? Now, you may have to revise what you want to happen. And part of that is you don’t want to have that strategic anchor, my budget, I can’t change my budget, I can’t see my budget. I’m going to drive my business, just so I hit my plan because that’s what the incentive compensation is, which is totally backward.

[5:43] Ernie Humphrey:

So, I just want to look at some budget inputs. Let’s think about budget forecasting. These are things that we need to understand and these are things from Treasury that we can help everyone else understand as we put the budget together. What are our forecasted revenue drivers, what’s our forecast revenue? What are our cost drivers? What’s our forecasted cost? Most importantly, we’ll see in a couple of years forecasted performance drivers. And does that look easy? What drives our revenue? What drives our cost? Can we forecast our costs and revenues? Of course, that rose up in cash forecasting. But when I tell my people that aren’t in finance, my friends, how much time we spend trying to forecast, they don’t believe that we can understand why we make money and why we spend money. So that’s pretty common.

[6:33] Ernie Humphrey:

So data humor happens to me all the time. You use the CRS database to size the market, the data is wrong, then use the city’s database. The data is also wrong. Can you average them? Are you sure the data you give me is correct? I’ve been giving you incorrect data for all these years. This is the first time you’ve ever asked when I said the data is accurate. So you get that, that mindset of getting it over with giving me the number, tell your CFO once was what he wants to hear. And so that’s kind of a hard conversation. So a buddy of mine, Steve Player, would tell me a forecast to run into a rock is a good forecast. We can’t just say we’re not going to hit the wall, in the cars going 90 miles an hour, the walls, two feet away, it’s going to happen. So don’t try and show the CFO that the numbers are looking good this quarter. So before we get into budgeting here, let me bring Jamie and finally she’s like, “Can I talk? Please? Can you give us an overview of your budget process and the role that you have and what you’re doing and how things might be changing for you”?

[7:47] Jamie Munnik:

Yeah, so our budget process typically kicks off and I guess you probably asked what depends on what team you ask at our company because everyone’s probably doing stuff all year long to plan for the next budget, but I would say probably like August-September timeframe, we probably kick off our budget for the next year. We do a budget and then we do a quarterly forecast as our formal forecasts. And then we do a monthly IBP planning process as well. So we do use our forecast from our nine plus three or September forecast as our baseline for our budget, and then adjust from there to hit that target that our CFO comes around at the end of the day. And he’s like, “No, I want it to be this”. So that’s what we end up making it hit. As we kicked off early, all of our business unit teams contributed to that forecast. We have a corporate FPA team that leads it and forecasts for a lot of corporate adjustments. So my team actually forecasts for major corporate things like depreciation, incentive compensation, we get involved with any regulatory compliance. So my I coach the compliance team at Johnsonville. So we’re in charge of external audit, corporate insurance, Treasury, all of the above. We also are responsible for the cash flow forecast and the budget forecast at the end of the budget process, which is typically the budgets done today, we need the cash flow forecast in the budget forecast tomorrow. So we quickly just throw in some numbers and calculations and end up inaccurate, but it’s there.

[9:15] Ernie Humphrey:

All right, thank you so much. And so here’s some of the kind of what I see is the inaccuracies of the budget input estimate. So sometimes this helps us give people incentive to pay more attention to the budget and maybe a conversation with our CFO, we might want to show these slides to our CFO and say- Do you know everybody hates the budget, we better get them to like the budget. Here’s what happens. You have the wrong revenue targets. You have the wrong supply requirements. You have the wrong technology investments. You don’t know what you’re doing or why you don’t know the ROI to do it. And you have the wrong human capital investments. What does that mean? You have cost inefficiencies. You have revenue leakage, here’s a good word for your CFO. We have a productivity drag. You look at any CFO survey, what’s the top priority? Growth? You start to educate this all you need to do from this conference, educate your CFO about AP done wrong, HR done wrong, Treasury done wrong. Look at all the time that’s wasted inefficiency. That’s productivity drag on your company. That’s the gift that keeps on giving. Right, the unconference gift. So, Jamie, can you share with us just a little bit if there are any areas where you kind of see the consequences more often? Or where is a place where you’d like to do better in terms of your budget and Blitz?

[10:39] Jamie Munnik:

So mostly on the cash side, so we are a growth company, we’re investing a lot in international business and looking to acquire and things like that. So if I don’t know where we’re going to be from a cash standpoint, I don’t know how I can make sure that the funds are there when it comes time to make that large investment. So that’s probably the biggest area. Luckily, we’ve never had a spot where we don’t have the funding there. But I need to prepare so that I can in the event that it never does happen. I want to be proactive. So that’s where we start.

[11:10] Ernie Humphrey:

So, revenue targets are extremely important. We were talking a little bit before this session about how you might not need to borrow when you have to borrow. And so that’s a huge impact to you, you’re going to bump up against your covenant, you need to do some scenario modeling. So one of the things I forgot to ask you to comment on. So Jamie is at a company that doesn’t have Treasury so that’s also an obstacle here. So can you give us I should have asked before senior sort of context on how do you work with your team to kind of perform the function of Treasury without having somebody who’s like the Treasury person to go to and how you get your arms around what we all do every day, and you just don’t have the bandwidth to do that because you’re doing so many other roles?

[11:58] Jamie Munnik:

I think we’re just all hands on deck. I live with a team of six that report to me. And then we have some indirect reports and some of our international entities as well. But we do a daily borrowing look. So where we add on our line of credit, where we what money came in and the next day, what’s going out the next day to make sure that we’re leveraging our line appropriately. So we’re not borrowing and paying interest on things we don’t need to. But then the other thing is those international entities, do they have the funding there to support the business on an ongoing basis? Because for anybody that suddenly has cash in China, it’s not like, “Oh, our China entity needs cash tomorrow, let’s quickly wire the funds over, we need to be proactive. What is the China entity functioning today? And how much funds are they going to need? So, it’s an all hands on deck. So I’m the treasurer, compliance, insurance expert up at the company. So everything we can do to make it happen.

[12:56] Ernie Humphrey:

So let me follow up a little bit. So you’re here which is amazing. So you have to be proactive and kind of stay on top of things. So is there anything else that you do or like to look online? Or how do you make sure that you’re on top of your game and you’re not going to get hit with something like your CFO might come in and say, “Hey, what do we know about that? So can you share with us what you personally do?

[13:21] Jamie Munnik:

I think the biggest thing for me is building those relationships within the organization so that I don’t have major surprises. Hopefully, I do know what investments are coming down the pipeline. So it’s meeting with the international team on a monthly or on a weekly basis and having those conversations of what are you working on? And how might that impact us on an ongoing basis working with our retail team? So we have an overall finance team, including a PAR credit and everything about 50 people. So it’s just making sure we have those relationships built among the whole finance organization so that we don’t have surprises, hopefully, so that we can be proactive.

[13:56] Ernie Humphrey:

Okay, great, that ties in so my session yesterday morning, I was talking about the importance of internal relationships to your career success. And so that point was perfect because if she didn’t have that, she probably wouldn’t have a job right now. Because even though I was a treasury person, I got hit all the time with surprises because it was a silo. Here’s one of my favorite surprises. On the budget all the time, this is in US dollars, told the guy this has to be in US dollars, whatever comes over goes. Oh, sorry, I negotiated the contract in pesos, we have 100 million dollar payment due tomorrow. I am in good luck with that now, but those are the kind of surprises that we get hit with. And so, I mean, part of it is just being informed so as much as we can forecast AR and AP the non-operational cast from lows are what get us or we have, or you can’t see your FX exposures or you’re not getting hit, and they’re not telling you to like- Oh, by the way, we’re going to miss a big customer payment somehow in China or someone’s got delayed or they change them in China? Or they decided to do something or it’s not going to come in. And then I got to make an effect. So I got to borrow in foreign currency. Have fun with that. That’s not cheap.

[15:28] Ernie Humphrey:

So I like this slide. I just like that little graphic over there. So this is like common sense. But this is getting me thinking in the right frame. Wouldn’t this be nice? Has budgeting been done right with great data and process and equals value outright? There is value to budgeting. However, people need to take ownership of how budgets are created. So I do a lot of speaking on things like T&E expenses. There’s not much research on what’s the ROI of that and so if we’re able to challenge our departmental owners, what’s the ROI of that number? Now, they probably might slap you or something. But I mean, that’s the mindset that we have to get into. And then your budget and your forecasts will not be indifferent universes. So you get them in that mindset of this is the analysis, they’re thinking. I say we need to teach folks the skills of finance and Treasury and learn the language of marketing. And so once you have that relationship, you can check where do you get that number from. But data quality and integrity. We talk about one version of the truth. I’m sure that just is a pipe dream. I actually have done a webinar on that whole thing. That’s where I may ask your questions like- What are some of the data issues? Is it the quality, is it the timing is both and what’s kind of the things that you see?

[16:59] Jamie Munnik:

I think for us it’s the quality of the data going. And so if we do, I’m not sure I’m on SAP. So we have a model in PA. So it’s how do we make sure that those two models line up? And a lot of that is master data-driven? So do our retail customers roll up under retail in both models, or has this customer moved, but it didn’t move on this side? And where are we having those data issues to make sure everything rolls up? We’re very driven by our business units. That’s how we budget, that’s how we measure our results, measure our effectiveness. So if something’s misaligned, we were not measuring the right data.

[17:37] Ernie Humphrey:

Let me dovetail on that one a little bit. So you also have if I don’t know if I missed her, so you also have someone who does FPA. So, do you? And if so, how do you align with them with your numbers because there are often cases that F&P a forecast of balance sheet or cash is completely different to your line, how do you make that happen? That’s kind of a big pain point I see.

[18:05] Jamie Munnik:

So we’re different in the sense that our F&A doesn’t budget or path or budget. They use what we use. So our inputs use the same inaccurate forecasts that we use. That’s a good thing.

[18:18] Ernie Humphrey:

In the first step, you got to have a consensus. So when we talk about all the technology, and we can see the same numbers, and so here’s the reason that I think this exists. So I used to forecast cash, when we’re in the Treasury at least when I was there, we wanted to, we were always looking backward. We’re always looking at the bank account data, right? We weren’t looking at AP and AR and FP&As like why it happened. What’s going to happen? What’s predictability? And we’re always looking at the result. Why did the cash go out? Why is it balanced instead of understanding why? And so FP&A honestly was probably better because they were understanding what flows and had that knowledge and we weren’t just like with our head in the sand. So now we can talk to AP and AR. And this is what a lot of the automation and AI that HighRadius does. It helps us understand. You can predict the payment date, you can predict your flows, and what’s the variance in your cash forecast, besides getting hit with a whatever out of the blue? Why is that? I don’t think many people asked that question I didn’t. So I think that’s where we’ll see that. So back on topic, gathering data, data analysis, insights, action, so I always bash on the budget, but I do see that there are value planning and forecasting. So, that wouldn’t be nice. Like you have a pretty close to that. If it’s a normal company, a little more green as usual, there you go.

[20:06] Ernie Humphrey:

So it usually, I should have another one reality is like Star Wars that you’re fighting with the Jedi. You’re like Treasury and FEMA and marketing, who knows what they’re doing. You know, they got the terminator over there and sales, they come in and just I do whatever I want. Don’t tell me what to do. This is my number. It ain’t happening. I’m spending whatever I want to. That’s just the way it goes. I told the CFL if I want to hit growth, I’m going to spend that number. What’s the margin? I don’t care, I’m just hitting my sales go. So this is a little bit dense. So I’ll go through this pretty quickly. I have webinars on this. So the system gets you in the framework for planning. So one of my things in forecasting in value from the Treasury is we need to impact performance across the enterprise. And so people always start at the top with the data we should start at the bottom. What are the drivers at the departmental level, to cost and revenues and value? So if you look at the driver-based need to identify the factors that impact the company value, establish a relationship between the KPIs and value drivers. And then you have to incentivize right, those actions. And so, in order to achieve our objectives, which is at the company level, XYZ needs to happen. That’s what we want to happen. But if these things don’t happen, or if ABC happened, then we’re going to get derailed. So what are those factors? What’s going to derail your process, and then you have to parasols into things you can’t control but you can learn to manage the variance there. And then I always get asked, What are the drivers for my company? You pay me about a half a million dollars and I’ll figure it out for you. But it’s not as you well know. There’s no easy answer. There’s a number but people asked me is it industry-specific? I hope so. It is company-specific, it better be that your competitive advantage.

I see all this stuff about KPI. So we should start measuring what’s my competitive advantage? And how do I mop the mindset? And how do I manage that I never have seen a metric? You just witnessed the birth of a whole new industry. Jamie’s going to be my partner. So the company-specific company size and your risk tolerance, that kind of plays in there as well. And then this is dense stuff and I wish all my other people are here because they make fun of me because my slides are too dense. The reason I like to show this slide is I know everyone tries to measure success and value. What we’re seeing now is if you ask CFOs and CEOs, what are the value drivers and company? What do we see? Customer satisfaction, quality of the business process, customer relationships, quality of people, reputation and brand. Do you recognize that? Probably not, right? That’s where the world’s going. Now, for me, that’s a blessing that doesn’t make sense. What’s the most valuable thing for your customers? How do we give them value? Our people? What about our reputation? So we need to figure out how to tie those to our operations and our costs. And so that’s what data helps us. And so what happens with the wrong drivers? What if we’re looking at the wrong things? What if we’re not able to monitor and measure, we just assume we don’t do analysis, we just assume that’s what drives data.

John’s been in this industry. 30 years, John says this drives revenue. Now, you never want to take away someone’s initiative and their intuition. But we have to teach folks. Hey, how would you like some data, and you’re going to become much more valuable. So I can put some numbers behind what you think. And we might be able to make your intuition even better. How would that be? So, again, the same things, what happens? Wrong actions to inspire the things you want wrong supply, wrong technology, ineffective cash management, same consequences to the bottom line? Again, you want to talk to your CFO, talk to the revenue line, we can get them on the revenue line, get them on their productivity line. So Jamie, is there anything that you would say is a key that drives your numbers that’s most important in their areas where you would like to do much better and have a better understanding of how to help your people understand more?

[24:55] Jamie Munnik:

I think that’s why I came to this conference this year was to see what comes out in the Treasury space, if you don’t know what Johnsonville does, we sell the sausage, primarily sausage products. So we have a pretty quick-term product, right? It’s perishable. So our turns on our receivables are about 12 days. So if we make a sale Two days later, and I’m not forecasting for that sale coming in, because I’m looking at a monthly basis of sales, I’m not necessarily looking at what week or what day those sales took place. So even a day can make a huge change. Another big thing(I was talking to the HighRadius team yesterday) was commodities were a commodity-driven market, right, so pork prices go up, our inventory typically turns in a month. So if you have port prices that are all of a sudden going to spike, that’s going to change our cash forecast in the next month because we’re going to now have to purchase at a higher amount and it’s going to turn in the next month. So how am I forecasting for how that’s coming through and in our margin. So, it’s the inventory turns which is big on our part because of the commodities, the receivables and then obviously the payables two.

[26:01] Ernie Humphrey:

I know it’s about impossible, but maybe this is something you’re going to put more analysis behind. It seems like you would have some pretty significant potential supply chain disruptions, maybe even the weather, the trucking. So how do you guys kind of do the best you can to kind of incorporate and react and kind of incorporate that and communicate what’s going to happen now? So people aren’t shocked at what you do. You didn’t know that. You know, they might not know that there’s a huge snowstorm and it just blew up. So can you explain a little bit how you deal with that?

[26:33] Jamie Munnik:

I think a lot of that’s the sales team. So we relied on the sales team to bring in a lot of back of what they see is happening in the markets. So while he’s a Super Bowl as an example, for our company, if the Packers would have gone to the Super Bowl, that’s a lot of extra pounds.

[26:52] Jamie Munnik:

So it’s things like what’s coming down the pipeline, and it’s all that relationship building. So not only what’s coming from the sales perspective. But how do we make sure we can produce it right? So we can’t run a cooked sausage and a fresh plant from a sanitary standpoint. So we want to make sure that when they’re making those sales, they’re not just making a sale and a product that we can’t still produce, because we don’t have the capacity in that area. So, it’s all those relationships on that communication that’s important for our team to be successful.

[27:22] Ernie Humphrey:

So can you kindly share with us how you’re able to communicate that information to you so that I’m sure it’s both verbally and email? So how do you make sure that you capture that and then you can share it? How do you use it because it’s great, but you have to be able to push it out? So how do you guys get that done? It’s interesting. I would love to know.

[27:48] Jamie Munnik:

So I think I’ll be honest, that on the cash side, we’re behind. So we’re not sure in those discussions today to forecast the cash. And again, luckily, we’ve never been in a cash issue where we couldn’t make the investments. We needed to make it. But we do a monthly IBP integrated business planning process. So that’s where we’re getting a lot of that information. So there’s a team focused solely on each month, you know, within the first 15 days of the month looking at what we’re forecasting now from the rest of the year, we’re converting over to a rolling forecast where we’ll be looking at more long term throughout the process. And, it’s just looking at how that monthly forecast is rolling up, and how that’s going to play into our success in the next year?

[28:33] Ernie Humphrey:

I don’t like the slides, you can tell us to take a pause. So does anyone have any questions for Jamie? Because if I was in the audience, I would be like asking you 100 questions before I take up all the time, just about what she does, what our team does, and maybe not even on this topic, but she deals in compliance and risk and insurance and is there anything related will bring this back, but I just want to make sure that you have the opportunity to tap into Jamie’s knowledge and I want to make sure that I’m giving her the opportunity to share with you, you don’t have to raise your hand. But I just want to make sure that we’re facilitating that conversation as well. And you can listen to me talk all day long, but she has much more knowledge than I do.

[29:26] Audience:

When you were talking about supply, chain, weather and all those types of things, but all of our business units, the finance team actually does. And I think all the information comes from the different business units. And there’s a nice review of what’s going on within retail. What’s going on? What are the drivers that impacted our results for the month?

[29:47] Jamie Munnik:

Yes, there’s a lot of month-end conversations too, so I’m missing them all today. This is our busiest day of the year from a results review standpoint. So yeah, we do. This day of every month, I’ll sit down with every team and say what’s happening within the plans today? And what do we need to be aware of? Have we accounted for all the things we need to account for? What’s out there from a risk standpoint? How are our inventory levels? Are we too high here? We are too low there, what might be coming through where we’re going to have to make donations or scraps or things like that? Meeting with the retail team. Anya, what happened in the month? Was it weather-driven? Whatever other factors might have come in, customers front-loaded their inventory too much, which is another thing we’re looking at is today, a lot of our forecast is based on our internal data.

So how do we pull in our customers’ data on what’s turning within the stores and things like that, so we can incorporate that into our forecast? Because if we said we sold Walmart 50,000 pounds last month, so in that next month, we’re thinking they’re going to pull 75,000 and they’re like -Well, we only use 20,000 pounds because that promotion didn’t run as we planned. Obviously, they’re not going to pull the same amount next month, so it’s having that what’s coming? What’s happening at our customers? So our finance team is broken into those business units being international retail food service, so stadiums, convenience stores, things like that. So it’s having those monthly discussions formally, and then informal conversations off the cuff.

[31:21] Ernie Humphrey:

So it just seems like a lot of times when people want to go into where you want to go is leverage cash forecasting, they have the biggest challenges in the environment, in politics. And so as you might feel that you’re not quite there yet, you’re more than halfway there. Because I can. You can see that the culture is there and the data is there and people are hungry for more. And so if you few of you in the audience have never had to roll things out across your enterprise and understand and don’t have a centralized process and don’t have those relationships. That’s a huge terror barrier. And so I think it’s going to be amazing to see and I am going to make a prediction here that next year might be the year after, but I guarantee we might speak together. She still wants to talk to me after we’re done, and we’ll be talking about how they’re leveraging AI and cash forecasting, and there is going to be the big case study for that as well.

[32:42] Audience:

I was asking a company about your size and usually, you will have a dedicated Treasury Department. Treasury usually grows out of accounting. Do you think you’re moving in that direction or maybe having some kind of carve out that’s specifically focused on Treasury and the strategies that Treasury might bring the hedging of those commodities separate from the pyramid?

[33:04] Jamie Munnik:

Yeah, that’s been a constant thought in our mind on how do we continue to make sure we’re doing the right things and managing the interest rate risks and the commodity risks and things like that, from a financial perspective as much as we can, we don’t have a team dedicated to it. So it’s certainly been something we’ve constantly talked about. I’ve haven’t seen anything where it’s been on a plan yet to this point to add a formal Treasury team, but we are leaving stuff on the table, I would say our team is stretched pretty thin the way. So to be able to get there as much as we can now. So my coach or my boss is the controller. He has done a little bit more with Treasury, we’re trying to get our teams more involved. But yeah, we don’t. Right now, it’s a lot like utilizing our banks as much as we can and building relationships with them to help them have them help us with some of that treasury management as well. But, hopefully, someday we will have a formal Treasury team.

[34:07] Ernie Humphrey:

In my mind, I think you win. I mean, you probably already have it, but it seems like you’re investing in having visibility. And so I think the business case will be, you do everything amazingly well, but I think you’ll be able to see the value in kind of dialing into things and see areas where if you would have had someone completely dedicated that you would have you can I think you’ll be able to show that ROI is pretty strong. So I hope that detour was okay, but I want to give her the spotlight a little bit. She deserves it. So driver-based planning is done right. I won’t go through this if I have a webinar on this all day long. So that’s your takeaway. Forecasting and cash management are my love. So this is what we’re trying to do. I think this gets lost sometimes and believe it or not, need to meet the short term cash and all relevant currencies meet the long term needs and all relevant currencies, short term and long term working capital financing and interest rate risk, meaning the company’s capital structure, Treasury team, you know what they can do, they can spend eight months trying to figure out what your optimal capital structure is. I’m sorry, I’m just joking.

That’s not a good investment for my time, funding is your companies short term and long term growth strategy. So I think sometimes people when they are even in a C suite, they don’t understand the value, they think we just go and play with banks and whatever. So that helps you get the seat at the table. So here’s what happens when cash management goes wrong. I think I’m getting my brains too tired. The risk there is a mismanagement. Do you know what they tell us about interest rate risk? Financial risk? Your investments are mismanaged if you’re fortunate enough to have excess cash or short term investments. But wondering if the repo markets are going to crash makes me nervous even though I’m on Treasury, cash misallocation financing gone wrong. There’s a word you’ll hear not as much as digital transformation. If I say digital transformation three more times, I wish someone had a taser because I want you to tase me. Because if that word is just used way too much, finance agility is inhibited. What does that mean? Cost inefficiencies revenue, leakage, growth, opportunities loss, your sales team will listen to that productivity drag.

[36:29] Ernie Humphrey:

Forecasting is done. In theory, this is a kind of dance. And this seems like common sense. I’m sure Jamie gets it. But a lot of people I talked to, I’m not certain about what’s the purpose of your forecasts or what you are doing, or if is it short term or long term, or what’s the accuracy that impacts your decisions. Here’s my opinion. I don’t care. If my forecast is 50% off if it doesn’t impact the decision, who cares? What’s the ROI that I think people get? They see all this data now. We see all this stuff about intelligence, that it’s not intelligent unless it impacts decision if it’s just data and it’s worthless. Understand your forecast. We talked about your data, your sources, understand your sources of variance. And this is where my friend, FREEDA, the automation bot for HighRadius, comes in. Wouldn’t it be cool to ask FREEDA? What do you think is the variance of my cash forecasting?

So getting at those variances is cool. And then if you don’t have the automation tool, if you’re going to select a method, don’t make it too complicated. Now if there were more of you, and you know what story I’m going to tell but I’m going to tell it anyway because I don’t see anyone that knows my story. I used to work in manufacturing. And I just got out of college, Mr. Quantitative dude. So I go in and I’m going to help them forecast demand. I’m going to run a Monte Carlo simulation, the director of products comes in and asks, “What are you guys doing?” He’s got this little excel sheet, a couple of slope shifters or an ominous. So I go over, spend a couple of weeks trying to look at my variance and model and I got bearish only, not even to 50%, he goes like 95% and I’m like- okay, so that’s just the thing. Don’t make it too complicated if it’s lumpy, but understand what your data is telling you.

[38:51] Ernie Humphrey:

Let your objectives drive your process and not your method, work closely with AP and AR and understand and take more control of your cash movements. That’s my big thing for the last couple of years, control your cash. Aren’t we like being obsessed with controlling cash? Why don’t you understand? When I was in charge I had to in painstaking detail, every single system, every single person who could make a payment or touch cash in every single system, I had to map it out and understand what’s happening and why. And that was across 15 countries. And this is a true story. It’s more complicated. They still use what I did 20 years ago, and are probably prettier. But I think it’s incredibly important to do that. And so that we remember when we all had Sarbanes Oxley, and we did all these things and risk and stuff. Now you can actually use that. You can kind of see where the money is. So let me bring Jamie in here for a second. I’m going off target again in three minutes. No, we don’t do that. Just kidding. So, what’s going to bring you in? This is off-topic about technology. So give us a little kind of overview of the technology that you use and what would you like to use and where do you see that going? I think that’s going to be interesting to hear.

[40:16] Jamie Munnik:

Yeah, so on the AR and cash application side, we use HighRadius, we use an SAP, we’re on the ‘S’ for the database. For SAP, we use the PC from a consolidation standpoint. We use TPM for our trade promotion management. So we have a lot of systems kind of working all over the place. My team primarily works in SAP and APC.

[40:42] Ernie Humphrey:

Great. So just a few slides I want to hit here and this is, look at my one-man shop graphic design. That’s pretty cool, right? Give me a pat on the back. This is interesting because this is what happens if you do it right. Do you want process visibility? You want customer relationship visibility, supplier relationship control receipts that give you account receivable predictability. So those are things that help you in accounts payable and process relationships. And then how does that fit into that predictability. And then this is where we’re changing the game here on cash forecasting. Now, I’ve probably listened to 50 sessions on cash forecasting. Until like, six months ago, I had never seen anything different. What’s going on here with this AI in HighRadius, this is a game-changer for cash forecasting. You have AI-based forecasting, you can AP, you have flexible models for your operational cash flows. This is where we have to get hitting on operational cash flows, integration of forecast from F&P, a team like right if we don’t have that, and continuous improvement. So we’re getting better. We’re learning, we’re changing. And so I don’t think this is an overstatement.

Anyone that’s been in Treasury, you got to be tired of hearing the same presentation because I’ve given it to you for the last five years when you start to see the technology and the AP and AR and that predictability. That’s a game-changer. So I won’t go through my AI stuff. I got a bunch of slides because you guys have already heard that. It’s good stuff. But you guys don’t hope you’re not afraid. But this is my little fear. We’re already doing it. Right. Facebook, Snapchat, Instagram, Uber lift, Siri, Alexa, Freeda, navigation apps, streaming apps. So this is what my brain looks like right now in action. There’s a lot of stuff firing. Well, this was at the beginning of the conference. Now right now, I’m probably on about one-third of that. But these are just some interesting takeaways from the slides. So if you want to understand how it works, I think some people get intimidated by it. You just seem like a base knowledge because someone’s going to come and ask you some of this AI stuff. You don’t have to be able to blow your CFO, I just had to say, “Well, what do you want to know”? Like in giving them the basics. So the basics are there. And you’ve probably already heard them.

So fast forecasting is done. Real quick. It might be over time. So I will just encourage you, instead of going through these slides, they have cash, they have a treasury booth, and they’ll show you all the views. So they’ll show you how you can look at your cash position, the various drivers. So I kind of go through these challenges that we have and this is how having that automation and AI base think and impact your decisions. So let me get to my closing thoughts. So forecasting went wrong. You have cost inefficiencies, revenue, leakage, growth, inhibited opportunity, loss, productivity, and drag. What’s one of the things we’re trying to do here is in your mind, what’s my business case for taking more ownership and proving the quality. If you’re going to have to build that business case, if you want to, no matter how cool the technology is, you have to build the business case. And so what can I see in terms of cost efficiencies? What can I sweat? Am I going to see revenue liquid leakage? How is my growth inhibited?

The other metrics that we’re starting to see are how much time do you and your team spend on non-value add activities, and then look at what automation does to that number. And now, the other thing is, you can tell your HR people, we have happier employees, right? Wouldn’t you be happier if you were banging on a spreadsheet for 10 hours? Wouldn’t you be happier if you’re not having the same arguments internally and externally because we all have the same information and the old productivity drag? So closing thoughts about effective cash forecasting, you need to understand what happened, which is where we are in the Treasury. This is what we need to do. Why? And that’s where we need to get help from our AP and AR and our folks in accounting, effective collaboration, I think we talked about that visibility is the key to anything, keep it simple, right? You have to have visibility to unlock the opportunities. And automation and AI are where we’re going. So I think we’re over time and Joe gets nervous back there because we’re over time. But Jamie, do you have any closing thoughts that you’d like to offer?

[45:29] Jamie Munnik:

I mean, I have my business cards, if anyone wants to reach out or if anyone is also going through the transition, to try to get to know more of an automated approach, I’m open to building some networking to see what other companies are doing and moving in that direction.

[45:41] Ernie Humphrey:

So thank you so much. I sincerely appreciate you getting up early in the morning. And, as always, I’m happy to have conversations with you after and I should have said this during the session. If you came here for a reason. And we didn’t. I didn’t touch on what you wanted, then stay as long as you want. So, thank you so much, everyone, and thank you to HighRadius for putting on such a great event.

[0:00] Announcer: Thank you all for joining today’s session on how to gain visibility of cash and improve collaboration with AI. Today, we have with us Jamie Munnik, assistant controller at Johnsonville & Ernie Humphrey currently serves as the CEO of Treasury webinars. And as the CEO of 360 thought leadership consulting. We have Charity here with us who are going to circulate the signboard and you know what to do, you just need to put your name and email address on it. It will help you gain one credit for CTB recertification. So, Jamie and Ernie, the stage is all yours. Thank you. [0:37] Ernie Humphrey: Thank you so much, sir. And thank you, everyone, so much for waking up with us this morning. And thank you to Jamie for being brave enough to speak with me. So that’s a lot to handle. So I think we have a unique session today. Because usually, when we have practitioners, so I talked about theory, we’re talking to someone that is like they’re at the end of the journey. And so Jamie’s a little bit, the beginning of the journey. So earlier in the conference, they’re like, way out at the…

What you'll learn

Jamie Munnik of Johnsonville addresses the implications of an inaccurate cash forecast on the budgeting process and what are the far-reaching consequences this would have on organizational growth, investments, fundings decisions.

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