How to Create Accurate Cash Forecast

Many treasurers prioritize improving cash forecasting. This is actually expected of them since they are being asked to support senior management in making strategic decisions. They must give information on global cash positions, develop funding options, and mobilize trapped funds for growth or acquisitions into new markets.

Moreover, high currency and market volatility and changing banking environments have been affecting cash positions which compel treasurers to pay attention to short- and long-term liquidity. However, putting together an accurate cash forecast does not have to be complicated. Learn more by visiting Here are steps to follow:

Determine the Reasons for Forecasting

There are a lot of reasons organizations forecast cash. These include finding the best return on investments, reducing external borrowing costs, or better controlling their cash flows.

Identify Appropriate Data and their Location

Forecasts are about data so organizations must determine the owner of the data, how they are generated, and in which systems they are located. Also, treasuries must know the level of detail they need.

Pick a Forecasting Tool

Before decisions are made, the organization should identify the extent which their current technology supports their needs. Also, they must take into account problems like whether their technology can consolidate data into a global cash forecast, the way it can connect to data sources, and how the organization can reduce manual data collection.

Make Cash Forecasts that Meet the Specific Needs of the Organization

This should include the forecast’s layout and frequency. Ideally, organizations will forecast in the cash flow’s currency.

Analyze Performances and Variances

This means comparing results to earlier forecasts in order to have a clear understanding of where forecasts are accurate and where they must be improved. In case of variances, the organization should determine how and why forecasts can be made more timely and accurate.

Run Market Tests

Forecasts can be most useful if they can adjust to market changes or events in currency rates. This can be done by stress testing a forecast by applying a market situation to the current forecast and considering the effect.

It is paramount for the organization to learn from their mistakes and improve their forecasting efforts. They have to determine if it is more accurate to make use of the actual forecast of the previous year as a future performance baseline or if they should build forecasts on a different foundation.

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