キャッシュをより鮮明に捉えるための 5 段階
Cash is still king — but the value of cash and forecasted liquidity held or planned by the company can only be realized if the treasurer knows what cash is available, where it is held and what flows are expected in the future.
However, all too often, treasurers do not have access to their organization’s full cash picture. There are many good reasons for working with multiple banks across different markets, but complex banking structures and sprawling geographical footprints can make it difficult to achieve complete visibility into current balances, never mind impacting the accuracy of cash and liquidity forecasting.
Luckily, achieving full visibility over cash is not an insurmountable goal. This eBook outlines the action plan treasurers can take to gain full visibility over their cash, from gaining a clear view of current bank accounts to increasing the accuracy of the cash forecast.
“More than a quarter of global cash is not visible to corporate treasury on a daily basis.”
Table of Contents
- What is Cash Visibility?
- Key Vocabulary
- Why is Cash Visibility Important?
- The Path to Visibility
- Step One: Identify and Record
- Step Two: Prioritize and Rationalize
- Step Three: Automate Bank Connectivity and Reporting
- Step Four: Generate and Streamline Cash Positions and Liquidity Forecasts
- Step Five: Enhance, Optimize and Predict Cash and Liquidity
- Find the Data: Collaborating with Other Teams
- Consolidating Forecast Data
- Measuring Forecast Accuracy
- Optimize: Predictions for your Cash and Liquidity
- Optimizing Cash Visibility Benefits
- Cash Visibility – Final Thoughts
- How Kyriba Can Help
What is Cash Visibility?
Cash visibility is critical to making effective decisions. Armed with clear visibility over the company’s current cash position and future liquidity flows, treasurers can:
- Invest cash strategically
- Support the CEO, CFO in strategic initiatives with the right levels of cash and liquidity
- Use cash management structures effectively
- Minimize debt and interest expense
- Make better informed hedging decisions
- Reduce bank fees
- Bolster treasury’s reputation within the organization
Cash Visibility means knowing what cash the company currently has and where it is held. It also means being able to predict what cash the company will have in the future.
Cash Budgeting generally performed by FP&A, is more focused beyond one year and has an increased emphasis on free, cash-flow guidance. The reconciliation of indirect budget-based forecasts with direct cash flow forecasts are increasingly managed quarterly.
Cash Positioning is concerned with today and often the next five business days. The purpose is to manage daily liquidity to ensure shortfalls are covered and surpluses are concentrated to earn some yield on excess cash.
Cash & Liquidity Forecasting typically extends cash positioning with horizons anywhere from one week to one year. Forecasting leverages multiple data sources to increase confidence in the projected liquidity balances so that better cash decisions can be made.
Why is Cash Visibility Important?
Cash visibility is the lifeblood of any organization. A company that has clear visibility can invest or deploy cash strategically while minimizing debt and interest expenses. Accurate visibility also increases the effectiveness of hedging decisions and enables the treasurer to mitigate their organization’s risk to exposures while supplying the CFO with funding in support of strategic initiatives.
Conversely, a lack of clear visibility can result in numerous issues, including:
- Insufficient buffer of surplus cash to absorb unforeseen expenses
- Idle cash, lower returns on investments
- Insufficient return on cash
- Higher than necessary borrowing costs
- Unnecessary bank fees and costs
- Inadequate support for CFO strategic decision-making
- Less competitive results and less effective treasury organization as a partner for finance
Unreliable cash visibility and forecasting is the treasury issue that causes CFOs the most concern.
“The top benefits of using Kyriba are the visibility that it provides, the timeliness with which it provides that visibility, and the ease of use, in that it provides it all in one simple one-stop shop.”
Director, Treasury Operations,
The Path to Visibility
Whether the treasurer is seeking to pay down external borrowing or maximize return on investments, the first step is to know what cash is currently available. But that’s not all, treasurers also need to be able to predict future liquidity flows and keep the right people informed.
Achieving cash visibility is possible by using 5 definitive steps to move towards greater cash visibility and flexibility:
- Identify and Record
Without an inventory of your banks and accounts, a complete cash visibility picture is unattainable.
- Prioritize and Rationalize
Identify where to begin, difficult regions or banks, and determine accounts for closure.
- Automate Bank Connectivity and Reporting
Harness the most costeffective and leading connectivity methods to access data from banks in an automated way.
- Generate and Streamline Cash Positioning with Liquidity Forecasting
Accurately predict cash flows over the coming hours and days, and match actuals to forecasts to speed up daily reconciliation and cash application.
- Enhance and Optimize Future Cash Flow with Liquidity Planning
The ability to see a holistic, aggregated view of cash and liquidity sources creates more accurate views and predictable free cash flow. Knowing your predictable liquidity creates a better understanding of any future liquidity shortfalls.
Step One: Identify and Record
Regardless of the scale and breadth of your organization’s banking and accounts structure, it is important to understand the banking landscape of all business units and subsidiaries.
Whether operating in a domestic or international capacity, banking relationships. the accounts, the purpose of those accounts, and the core attributes of the bank, the accounts and their purpose all are necessary to begin a cash visibility project. This has many implications for the success of global cash visibility projects, such as:
- Establishing a full inventory of managed accounts, ensuring all balances are identified
- Ensuring the proper scope and prioritization of your project
- Optimization and rationalization across banks and accounts
- Effective comparisons and evaluations across banks for
technical capabilities for connectivity, tech, regional coverage
and other important services
An effective bank relationship and bank account management database is the starting point for successful projects, but particularly when it comes to cash reporting. Where cash is rolling up in concentration or pooling structures, how funds are being transferred, purpose of the accounts, and even regulatory limitations all have a say in how you engage with your banking partners and the extent of cash flexibility.
Step Two: Prioritize and Rationalize
Bank reporting rationalization ensures accounts are identified and open for the right reasons.
Often, particularly in international or more complex organizations, accounts are opened in haste to support business development and decisions. This is often necessary for statutory purposes, or to deal with an unforeseen acquisition or reorganization. However, if this situation exists, it’s possible cash and liquidity is not well defined or identified, as well. Organizations must understand and rationalize accounts, prior to moving into the next ‘step’, but this can continue throughout the project in parallel, too. The focus here is on creating a streamlined, but effective banking and account structure that fulfills treasury’s mission of safeguarding and optimizing cash, while still meeting specific business unit or subsidiary’s requirements. Bank improvements in reporting quality as well as the leading application of configuration within leading treasury management systems, creates the scenarios where previously opened, special-purpose accounts are no longer required to serve special purposes such as revenue, collections, treasury, or payables accounts.
With banks being able to provide significantly improved quality of liquidity information within bank statements and other special purpose reports, and the speed of that data increasing through APIs, some companies can conduct business with one or two bank accounts per legal entity, business unit or country office.
The focus here is on creating a streamlined, but effective banking and account structure that fulfills treasury’s mission of safeguarding and optimizing cash, while still meeting specific business unit or subsidiary’s requirements.
Step Three: Automate Bank Connectivity and Reporting
Visibility over multiple accounts requires automated bank connectivity. Companies of all sizes are often challenged in finding and implementing the right bank connectivity solution and is a critical driver of lack of visibility into cash.
On the surface, bank connectivity is easy, so long as treasury teams prioritize the following:
- Speed and Cost
There are a variety of connectivity options to deliver security, automation and cost objectives. Yet, not all connectivity options are alike. Bank connectivity comes in a number of different forms, including:
- Host-to-host solutions, such as FTP, or leading practice connections using application programming interfaces (APIs)
- Country or region-specific protocols such as EBICS, Editran, Zengin
- Global cooperatives like SWIFT , which offer flexibility to manage your own connectivity or use a service provider and fully managed service bureaus
The ideal connectivity solution for an organization will actually depend on factors such as bank and payment transaction volumes, bank account structures, and the location of company banks. These characteristics — in combination with what technologies the banks can (and prefer) to support — will drive the ideal connectivity choices.
In practice, a combination of connectivity methods is likely the best solution to optimize costs while maintaining automation and security. Without utilizing varying connectivity methods, the company may spend more than necessary and potentially sacrifice information transparency.
While managing multiple connectivity methods on your own may seem complex, connectivity-as-aservice models gives organizations faster global access to banks with pre-configured and existing connections.
This coverage of the connective landscape for banks saves effort and time spelling big cost savings for the project phase as well as ongoing productive operations. When you select the right vendor to simplify bank connectivity by taking care of everything — from building connections, monitoring availability, and delivering automation all while providing new technology like APIs, organizations win and save money.
Step Four: Generate and Streamline Cash Positions and Liquidity Forecasts
The goal of cash positioning is to establish a realtime view of cash at any point in time and to be able to reconcile prior-day forecasts to enable the deployment of cash throughout the organization more quickly and accurately. Effective cash positioning reduces idle cash, creating opportunities to earn immediate yield while providing certainty over risk exposures that cash is exposed to.
As a process, cash positioning involves gaining a real-time view of the company’s cash position at any moment in the current day(s) by consolidating a number of different sources and replacing old data with more up-to-date information. With today’s APIs gaining the real-time, near-instantaneous view of cash and liquidity is easier than ever.
Within treasury technology, building the cash position typically involves combining a number of data sources:
- Prior-day balance — automatically downloaded from banks at the start of the day
- Current-day bank reporting — automatically downloaded from banks throughout the day, either at specific times (e.g., 1st or 2nd presentment) or as a constant stream of data via an API
- Expected payables and receivables — from the organization’s ERP and reported/cleared from bank statement details
- Treasury financial transactions and settlements — which are integrated within the treasury system
Building a cash position is just the start. After building a cash position, it is then necessary to maintain and reconcile it.
- Maintaining the cash position involves updating and replacing cash flow data with more accurate information via intra-day updates from internal systems and banks.
- Reconciliation of the cash position is the matching of actuals to forecast flows, which is often done first thing in the morning as a part of typical treasury processes. The goal is to identify and understand surprises — for example, if a transaction did not happen yesterday then it may happen today, meaning the unreconciled variance needs to be rolled into today’s position. For many organizations, this process can be time consuming, so rules-based automation or artificial intelligence can be introduced to simplify the process.
Key requirements for cash positioning include interactive dashboards and clear communication within — and outside of the treasury organizations:
- Interactive dashboards enable cash managers to drill down through multiple levels into any component of the cash position. Positions should be viewable by multiple dimensions in real-time by line item, bank, entity, currency, etc.
- Communication within and outside of treasury is critical. The treasurer, CFO and finance personnel managing subsidiaries all require cash visibility, so delivering visual and detailed reconciled cash positions is a critical outcome of daily cash positioning.
Effective cash positioning and liquidity planning leads to numerous benefits for the finance organization:
- Keeping the CFO and the Board up to date with reliable and accurate cash position information
- Mobilizing cash across the organization for funding and investment purposes
- Enabling cash management processes such as pooling, sweeping and intercompany borrowing
- Optimizing interest income and expense via better informed borrowing and lending operations
- Reducing external borrowing by using internal cash resources effectively
Step Five: Enhance, Optimize and Predict
Cash and Liquidity
While cash positioning can be used to predict cash flows in the coming hours and days, cash forecasting with liquidity planning information creates more accurate, longer horizons beyond weeks, extending into months, years.
Cash forecasting must not only be accurate, but predictive using more historical and current data to be truly effective.
Without complete confidence in projected forecasts, the cash forecast cannot support treasury in improving cash utilization. Cash forecasting is needed to help treasury invest cash over longer maturities, secure borrowing to fund operations and make more effective hedging decisions. And confidence in the cash forecast is the difference between achieving these outcomes and hoping to do so.
So why do so many companies struggle to achieve an accurate forecast? Common challenges include a lack of accurate data sources, lost results from past forecasts, ineffective methodologies and a lack of alignment with performance metrics. If a forecast isn’t reliable, treasury is unable to trust it and therefore cannot use the cash forecast to make critical decisions. It is crucial to incorporate data sources from treasury, like financial transactions along with all the normal P2P and O2C cycle flows from the ERP
Cash forecasting and Liquidity Planning creates future views of anticipated free cash flow and helps all of finance from FP&A to the CFO better strategic accuracy in decision-making.
- Identify, Find the Data
- Consolidate the Information
- Measuring Forecast Accuracy
- Predictive Analytics: Optimize Your Forecast
Find the Data: Collaborating with Other Teams
Forecasting incorporates key data points from elsewhere in the business so that effective collaboration can be administered between AP, FP&A, IT and regional controllers who own valuable forecasts data and/or administer systems to enhance forecast visibility. This collaboration is essential in making sure everyone involved knows what they are expected to provide with executive oversight to ensure that collaboration is prioritized.
Consolidating Forecast Data
Automating the integration of forecast data into a single system of record is the next critical factor in achieving effective forecasting. In many cases, source data may come from various ERP modules or in some cases other special purpose systems like procurement or revenue recognition/accounts receivable. In the past and in some situations, spreadsheet data to augment or provide coverage for areas or business units without systems could be a source, too. While consolidating data into a single system could be an IT-intensive exercise, best practice is to eliminate the need for internal IT resources, reducing the cost and time required to integrate systems. This can be done by having pre-built connectivity and integration through APIs provided by your treasury system.
Measuring Forecast Accuracy
The final piece of cash forecasting is to measure the accuracy of the cash forecast at a detailed level. Measuring forecast performance is critical to understanding how effective each line item and source of information was, offering valuable insight into where the forecast can be improved. This analysis must be done at a detailed level. For example, measuring accuracy before and after a 90-day/13- week period can hide many anomalies and offers no meaningful conclusions. Many organizations will measure week over week, while some will drill down at a daily level. Once accuracy is measured, the treasury team must implement a feedback loop to effect meaningful change. Regional controllers, for example, can only improve if presented with detailed facts. Further, standardized KPIs — that ideally would form a component of performance reviews and compensation calculations — go a long way in reinforcing desired forecast behavior. This is where commitment from the CFO will drive effective forecast performance.
Optimize: Predictions for your Cash and Liquidity
Once the foundation is established for forecasting your liquidity with the prior steps, the next level naturally leads to identifying the technology solution that will offer your organization and team the support and improvements for your liquidity forecasting.
Technology can do more to provide value through expanding the horizon of your forecast, depth of insight, accuracy, and enhanced user experience with information already within your organization’s grasp.
Through tools that leverage artificial intelligence companies today should be more advanced and be capable of:
- Create predictive dashboards and enhanced reporting
- Cash forecasts with risk models built-in
- Identify optimum cash cushion, draw-down levels, and investment levels
Characteristics to look for when evolving and upleveling your forecasting efforts should include looking to solutions using AI-based predictive analytics for forecasting including calculations based on risk models that give treasury and FP&A teams the optimal cash cushion. Additionally, look for solutions giving you:
- Cash flow by level of confidence
- Recommendations for optimal investment strategy
- Predict liquidity requirements
To successfully deploy an AI-driven predictive forecasting model, organizations must prepare structured and normalized historical data. Machine learning algorithms will identify patterns within the data to make predictions about when, for example, customers will actually remit payment. This AI-predicted data stream will align with other forecast data sources to deliver a more intelligent cash forecast to predict future liquidity needs.
Human interaction remains important to ensure liquidity forecasting and planning aligns with internal risk policies of the team and organization. AI is a tool to complement, rather than replace, treasury teams as they execute more complex tasks and processes. In this role, AI is a critical piece in the drive to towards real-time treasury decision making and the progressions towards 24/7 liquidity management.
Optimizing Cash Visibility Benefits
Achieving full cash visibility takes time and effort, but the rewards are significant. Armed with a complete, accurate and up-to-date picture of the current cash position and liquidity planning flows, treasurers can:
- Make timely and confident decisions about activities, including investments, borrowing, cash concentration and hedging
- Pay down external borrowing with a clearer view of the cash available
- Invest strategically with a clear picture of current and future flows
- Reduce bank fees by closing or combining redundant bank accounts or negotiating with banks from a position of knowledge
- Minimize debt and interest expense by making the best use of internal cash and reducing external borrowing
- Gain a clearer picture of risk exposures and manage those risks more effectively
- Optimize planning of borrowing and lending operations
- Increase effectiveness of hedging by ensuring decisions are based on complete pictures of current balances and planned future transactions
Cash Visibility – Final Thoughts
The future of treasury technology is here and advancing rapidly; some banks have deployed their own APIs to integrate with their customers’ systems.
New platforms are opening new products and services for corporate customers. One of these innovations is the movement towards real-time bank reporting. In many parts of the world, intra-day reporting happens less than twice per day, and in some cases not at all, meaning that daily cash positioning is largely driven by prior-day reporting and expectations of clearings throughout the day.
Real-time bank reporting, delivered only by APIs, is the future and will be a game-changer for cash managers looking to achieve instant cash visibility into accounts. Additionally, Liquidity Planning extends the value of real-time treasury with the inclusion of cash, treasury instruments, planning information and liability information to deliver longer range strategic decisions by the CFO.
Combined with real-time payments, treasury teams will be in an enviable position of not only having real-time views into bank accounts but also being able to mobilize cash domestically — and eventually cross border — within seconds.
The transformation to real-time reporting will further pressure treasury teams to employ the right processes and analysis to effectively manage cash information in real time. It will be a change for those organizations that lack modern treasury technology, but an opportunity for enabled organizations to earn a competitive advantage in the utilization and deployment of cash.
How Kyriba Can Help
Kyriba can support you in achieving full visibility over cash.
Kyriba helps organizations reduce the cost and complexity of bank connectivity — whether a company is connecting via SWIFT, using APIs, leveraging country protocol or using a combination of channels prioritizing security, automation and cost minimization. Organizations can easily keep track of signatories, manage workflows and store documents thanks to the control over all global bank accounts given by Kyriba’s bank relationship management solution.
Additionally, companies can maximize the accuracy of their cash and liquidity reporting with Kyriba’s detailed and flexible variance analysis and feedback loop to forecast sources.
With a full picture of current balances and future flows, you’ll be better positioned to make confident decisions about cash.
Want to learn more about how to achieve cash visibility for better cash forecasting?
Check out this webinar to hear Kelkoo Group, a leading e-commerce company, shares their best practices and the payoffs of superior cash forecasting.