Tools to Enhance Cash Flow Forecasting

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					Tools to Enhance
Cash Flow Forecasting
Bank of America
Cash Flow Solutions
    Polling Question


    Is this your first time to New Orleans?


    A.   Yes

    B.   No




2
    Overview
    • Effective Cash Flow Forecasting
       – What are the strategies, tools and best practices for more effective
         cash flow forecasting?
       – How can the use of the right receivables and disbursements solutions
         improve information reporting, cash flow predictability
         and enable proactive cash management?
       – What are the techniques to minimize excess balances, manage
         float and make strategic short-term investments for maximum
         returns?




3
    Polling Question
    In terms of effectiveness, our cash flow forecasting is:

     In terms of effectiveness, our cash flow forecasting is:


    A.   Extremely effective

    B.   Somewhat effective

    C.   Not very

    D.   Not at all




4
    Principles of Cash Management
    • Bring in the cash as fast as possible
        – Collection
        – Concentration
        – Using the appropriate treasury management tools
    • Use the cash for obligations
        – AP, Payroll, Debt Service, etc…
        – Using the appropriate treasury management tools
    • Hold on to the cash as long as possible
        – Full Range of allowable investments
        – Goal – Safety, Liquidity & Maximized Return (not mutually exclusive)
    • Underlying all of this – Efficiency

    • Can foreseeable patterns be created?
        – Can I increase my confidence in the cash forecast?



5
    Polling Question
    How are you currently managing and forecasting your
    cash flow?

     A.   Purchased system/software

     B.   Proprietary system/software

     C.   Excel (or similar tool)

     D.   Other




6
    Find More Cyclical Patterns –
    Sample Cash Flow Statement (Data taken from Bank Account Credits and Debits)




7
    Polling Question

        In terms of adopting new ideas/technology for cash
                  management, my organization:

        Tends to be an early adopter and expeditious implementer.

        Tends to be keenly interested in new ideas/technology but waits until others
        have proven its function before committing resources.
        Tends to be somewhat cautious with new items and sometimes slower to
        implement.
        Tends to be extremely cautious with implementing new ideas and new
        technology.




8
    Polling Results
    In terms of adopting new ideas/technology for cash management,
    my organization:


      A.   Early adopters




      B.   Interested



      C.   Cautious



      D.   Wait and see

9
     Analysis Charts




10
     Typical Tools & Data Sources for Cash Flow
     Forecasting
     • What do you use?
        – Receipt Forecasts
        – Disbursement Forecasts


     • What can be done differently to either
        – Increase accuracy or timing of information
        – Change patterns
        – Speed up availability and/or hold onto money longer




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     Consider Alternative Cash Management Tools -
     Receipts
     • Goal: Understand the day-to-day activity and trends associated with major
       receipt streams. We will look at the tools you are currently using to collect
       the cash. Ask the question – How can we collect our receivables quicker,
       more efficiently, and with greater predictability?

     • Analysis Documents: Bank statements for major receipt accounts and
       analysis statements over the past 12 months.

     • Possible Receipt Tools:
         –   Check Transformation (Check 21)
         –   Electronic (ACH, Wire)
         –   Lockbox
         –   Merchant Services
         –   Web-Based Receipts
         –   Funds Concentration




12
     Polling Question
     Where do you stand in implementing Check 21
     technologies?
      A.   Fully implemented

      B.   Somewhat

      C.   Starting up

      D.   Not at all




13
     Comparison of Receipt TM Tools




14
     Check Truncation




15
     Creating More Predictable Streams




16
     Comparison of Receipt TM Tools




17
     Creating More Predictable Streams




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     Creating More Predictable Streams




19
     Consider Alternative Cash Management Tools -
     Disbursement
     • Goal: Understand the day-to-day activity and trends associated
       with major disbursement streams. Look at the tools currently
       being used to disburse cash. Ask the question – What can be done
       to disburse cash more efficiently and with greater predictability?

     • Analysis Documents: Bank statements for major disbursement
       accounts over 12 months. Analysis statements for the same
       accounts for the same period.

     • Possible Disbursement Tools:
        –   Electronic (ACH/Wire)
        –   Purchasing/Travel Cards
        –   “Virtual” Cards
        –   ZBAs & Controlled Disbursements
        –   Fraud Protection



20
     Polling Question

     What percentage of your funds are disbursed
     electronically?
      A.   Over 75%

      B.   50% to 75%

      C.   25% to 50%

      D.   Under 25%




21
     Typical AP Disbursement Trends




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     Creating Predictability out of Chaos




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     Creating Predictability out of Chaos


                   ACH,
                                       Pay these vendors weekly
                   Wire,
                 Electronic
                  Payment

               Virtual Credit
                 Cards - All
                 purchases                       Pay vendors daily,
              between $1,000 -                   Pay bank monthly
                   $5,000


         Standard Purchasing Cards
                                                       Pay vendors immediately,
        - All purchases under $1,000
                                                       Pay bank monthly




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     Tools for enhancing forecasts
     • Analyze historic cash ebbs & flows
        – Find cash trends – when did money come in or go out and how much
        – Find method of receipt or disbursement


     • Match treasury management tools to:
        – Receipts – different streams may need different tools
        – Disbursements – look at electronic payments pegged to specific
          outflow dates (rather than disbursing money daily)
        – Use tools that will make more foreseeable inflows & outflows


     • Track changes of trends over time
        – New & more predictable patterns emerge
        – More timely information available
        – Incorporate these into forecast


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     Pointing to your cash investment

     • Accuracy of information, capturing trends and creating
       predictability of your cash flow allows greater assurance of
       successful short-term investment without jeopardizing
       appropriate liquidity levels.

     • Have correct investment tools in place for a normal yield curve
       environment.




26
     Polling Question
     Do you have multiple investment options for your cash management
     needs (e.g. money market, cash plus, enhanced cash, ultra short,
     etc.)?


     A. Yes




     B.   No




27
     Polling Question
     • Do you ever place assets in longer-term investment products in
       search of higher returns?


     A. Yes

     B. No




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posted:11/23/2011
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