Treasury is becoming a more integral part of the strategic decision-making process in corporations with liquidity planning and cash forecasting considered the top challenges when it comes to providing critical insights as basis for decision-making. Surprisingly, 72% of treasurers are currently using spreadsheets for cash forecasting as a recent Reval survey shows. Relying on these simple, but error-prone tools can lead to inaccurate liquidity plans and consequently, damaging business decisions.
I have compiled a list of ten scenarios, illustrating the negative effects inaccurate cash forecasts might have on your business.
1. Cash balances increase because you are afraid to run out of money, spending too much on interest payments.
2. Lack of global visibility leaves accessible cash idle instead of using it to fund your operations internally.
3. Bank fees and borrowing costs are too high because your bank does not trust your numbers.
4. A subsidiary fails to report an accurate forecast causing you to incorrectly project your position.
5. You cannot calculate cash flows at risk on spreadsheets and FX volatility hits your P&L hard.
6. Lack of visibility allows for fraudulent activity without an audit trail.
7. Inability to identify future cash surpluses causes you to lose out on investment opportunities.
8. Inaccurate cash forecasting causes you to provide poor advice on a business decision that goes wrong, costing your company a lot of money.
9. You look bad in front of your CFO and don´t get promoted … or worse.
10. Your company runs out of liquidity and goes bankrupt, because you could not identify cash shortfalls.
Reval has developed a step-by-step guide to accurate cash forecasting. Why don´t you take a look at our eBook to avoid the scenarios we have just reviewed?