Cash Forecasting Treasury

Using automated cash forecasting to support the modern treasurer

What you’ll learn

Learn about the role of a treasurer in the corporate treasury.
Understand the evolution of a treasurer’s day-to-day responsibilities.
Understand how cash forecasting automation helps the treasurer in becoming a strategic advisor.

What is the role of a treasurer in a company?

A treasurer is mainly responsible for keeping tabs on an organization's liquidity but is also responsible for the following tasks in corporate treasury:

Cash flow management: Assessing financial health by continuously monitoring the cash flows.
Funding, fundraising, and sales: Identifying the best course of action to fund daily operations, lending, or profitability and optimize sales performance.
Risk management: Assessing the risk profile, balancing exposures, and adopting risk assessment policy to manage and mitigate financial risks.
Financial planning and budgeting: Creating budgets for business growth and expansion programs to avoid overspending or maintaining cash buffers.
Monitoring regulations: Ensuring that the company is abreast of regulatory developments to prevent market failure and achieve macroeconomic stability
Cash forecasting: Analyzing the future cash position to meet financial obligations and manage working capital properly.
Foreign exchange management: Assessing the gains/losses in FX by understanding the exposure and fluctuations and hedging accurately.
Fixed assets and stock management: Tracking and maintaining the assets and inventory to avoid asset failures, thefts, and inventory shortage.

Apart from these tasks, they need to identify bottlenecks that inhibit growth and take transformation measures to drive continuous improvement for gaining competitive advantage (such as adopting leading-edge strategies and technologies and building rapport with the stakeholders). Sometimes, the treasury department is very lean; thus, the treasurer needs to take up additional responsibilities.

How has the role of the treasurer changed over the years?

A treasurer needs to perform rapid analysis, but manual processes lead to analysis paralysis. The role of a treasurer has been evolving with new business requirements, demands, and changing market trends. Larger companies expanding globally or acquiring new banks or businesses face complexity to handle multiple entities, and bank relationships are becoming cumbersome. The digital era of treasury calls for an innovative and tech-savvy treasurer. As emerging technologies are being adopted across treasury, the treasurer is expected to enhance skill sets to be a strategic advisor in the CFO’s office. The work-from-home scenario has led to an increase in data breaches and transaction frauds. Thus, treasurers need to prioritize risk management.

As the economy becomes more volatile, inflexible, or unscalable systems/ tools, age-old strategies such as ground-level assumptions/intuitions can no longer help safeguard an organization’s finances. Thus they need to free up some bandwidth to focus on value-added tasks by using automation for manual and time-consuming activities.

Why are companies moving towards cash forecasting automation?

Treasurers can’t afford to rely on incomplete/subpar cash forecast reports in today’s fast-paced world. They require to go public with those reports with the board of directors, CFO, investors, and shareholders. They also need to execute investment/borrowing decisions proactively by governing their cash positions daily and understanding the implications of certain scenarios. Thus cash forecasting automation is essential to them.

Automated cash forecasting enables rapid data gathering and consolidation, accurate modeling, and improved accuracy and frequency of variance analysis. Hence, treasurers can have easy data access and granular visibility into the cash flow forecasts and build accurate long-term cash flow forecasts to avoid cash shortages or missed opportunities during cash surplus situations.

How does cash forecasting automation software support the modern-day treasurer?

Cash forecasting automation helps the corporate treasurer to improve cash forecasting accuracy, perform variance analysis accurately, and understand the ‘what-if’ scenarios effectively, and execute informed decision-making due to the following reasons:

1. Increased forecast accuracy: As the data is extracted straight from the sources and updated regularly, the scope of errors reduces. Capturing customer-specific variables and external factors such as raw material price fluctuations increases accuracy. Moreover, the ‘closed feedback loop model’ in AI-based cash forecasting software compares the historical results to the current results and makes certain adjustments to the forecasts to build cash forecast accuracy.

2. Improved variance analysis: Due to the granular visibility into the cash flows and the drill-down capability, the treasurers can analyze the deviation between the forecasts and actuals and identify the variance drivers across multiple cash categories, regions, and durations. This helps in improving the forecasting efficiency and reducing the variance over time.

3. Accurate scenario analysis: Scenario analysis is improved by incorporating adjustments into the forecasts and analyzing the impact of each scenario on the cash flows. The ability to perform forecasts frequently also helps in capturing trends and patterns.

4. Informed decision-making: Due to real-time reporting, continuous data access, and accurate insights, treasurers can implement data-driven, confident and timely decisions for managing assets, improving funding, proactively handling risks, and improving overall corporate treasury management.

Helping the traditional treasurer shift roles to a modern treasurer

The treasurer does not need to spend more time on manual/clerical work by implementing automated cash forecasting software. The modern treasurer is regarded as a high-value employee who:

Identifies opportunities for cost-cuttings
Invests in business expansion or M&A at the right time
Handles counterparty and FX risks strategically
Improves business operations and increases productivity
Sends real-time reports to the CFO
Maintains relationships with the investors and the board of directors

Learn more on how AI-based cash forecasting helps the modern-day treasurer be a strategic decision-maker and analysis expert.

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The HighRadius™ Treasury Management Applications consist of AI-powered Cash Forecasting Cloud and Cash Management Cloud designed to support treasury teams from companies of all sizes and industries. Delivered as SaaS, our solutions seamlessly integrate with multiple systems including ERPs, TMS, accounting systems, and banks using sFTP or API. They help treasuries around the world achieve end-to-end automation in their forecasting and cash management processes to deliver accurate and insightful results with lesser manual effort.