You’re wasting your time forecasting

You’re wasting your time forecasting

If it takes you more than 30 minutes to update your global daily cash forecast, you need to evaluate the tools and methods in your cash forecasting process. If you still rely on Excel for cash forecasting, you need to adjust your entire cash forecast workflow.

Cash forecasting is a core treasury process and treasurers identified cash forecasting as their top priority for 2016. However, most departments lack the resources and focus to maximize the benefits of cash forecasting. A best-in-class treasury department follows three simple principals for cash forecasting:

  1. keep the forecast high-level;
  2. automate the majority of the process;
  3. and hold the process accountable.

Simplify, simplify, simplify

The cash forecast shouldn’t be perfect; ideally it should suggest actions to consider. Too many organizations create detailed cash forecasts that show activity down to the transaction level in pursuit of total transparency, yet the effort to cull such specific information outweighs the benefits of additional data. We believe a cash forecast should not surpass 15 line item categories. The forecast should identify specific areas pertinent to the business, such as premiums for insurance companies, while grouping together less relevant activity. A forecast should not, for example, highlight individual, highdollar transfers from one entity that occurs every few months.

It is tempting to believe more information leads to better decisions, but the time it takes to track down data means treasury has less time to analyze the forecast for trends and variances. Additionally, senior management often requests to see forecast details. This is where technology balances the need for high-level analysis and detailed insights.


Any cash forecasting workflow that requires an Excel file will never meet best practice standards. Excel suffers from the unique problem that it can do too much; departments succumb to the flexibility of Excel, which requires manual intervention or complex macros with strict formatting rules. A treasury management system (TMS) or specialized cash forecasting solution (CFS) automates most of the forecasting process, from data sourcing to variance analysis. Organizations must design an intelligent forecast within the system in order to automate the workflow.
This requires a structured, holistic approach.

It is important to repeat that simplification is the first step to automate a cash forecast. Understand the functionality of your technology and constrain your team to those limits. Work with business units to define the line items that are important to them and discuss the activities that are significant to senior management. Ensure that your technology solution captures 95% of forecasted activity; this may require adjustments to other workflows. Draft the workflow in advance to identify process changes as early as possible, but understand the drafted workflow will change throughout the project.

Better data leads to better forecasts

Local users must enter as much information as possible directly into the technology solution in order for automation to work well. Business units often remark that they do not know final transaction amounts until the actual day of the transaction activity. It’s therefore necessary to acknowledge and accept estimated values, but encourage the business units to update their forecasts over time. In doing so, the TMS/CFS will have the data in the system and automatically roll-up the information to the regional or global level for your centralized forecasting needs.

Better data leads to better forecasts while simultaneously decreasing the time spent by group treasury on chasing information from the business units. Similarly, use your technology to capture the actual activity when it occurs to automatically calculate the variance between forecasted and actual amounts. The future state of a best practice cash forecast process only requires centralized treasury to enter a few ad hoc items; there is limited manual intervention beyond that.


After simplification, holding the entire forecast process accountable is the penultimate priority. Establish a deadline for local treasuries to update the cash forecast on a weekly basis within the technology solution, even if the updates are minor. Leverage your technology to automatically notify the responsible party when they fail to meet a deadline, and investigate why a certain business unit repeatedly misses the mark. Set a variance target for each line item, identify why forecasts breach those thresholds, and communicate that these performance metrics impact local and regional reviews.

Finally, hold your organization accountable. Clearly explain the importance and benefits of cash forecasting to both upper management and business units to obtain emotional buy-in. And dismiss any claims about inadequate technology solutions: providers now produce systems for small and large businesses alike and a well-designed cash forecast is simple enough for any technology solution to handle.

A best practice cash forecast directly improves an organization’s financial position and strategic planning. With less time spent creating the forecast, treasury departments have more time to analyze predicted activity and prepare for it. Proper trend analysis monitors how well the business adheres to the overall strategy of the company, and when the strategy needs adjustments. A continually updated forecast decreases the time to react to changes in expected activity. All of these benefits trickle down to business units: stronger corporate guidance, improved decision-making, and proactive management. None of this is possible if treasury departments do not have the time or the resources to create a structured cash forecast process.