What CIOs Need to Know About Cash Flow Forecasting
Share This -
Friday, 17 July 2009
By Laton McCartney
In case you missed your morning coffee, here's an eye opener. Four out of five of the world's largest companies are unable to accurately forecast mid-term cash flow, according to a new study from The Hackett Group, Inc. and the National Association of Corporate Treasurers.
And today at least some of these corporations are turning to IT for help with these projections, Hackett Chief Research Officer Michel Janssen told CIOZone. "They're leveraging technology to create information that is highly reliable and readily available."
In some instances, CFOs and CIOs are working together to address the forecasting problem, Janssen said. "CIOs are becoming much more cash savvy today."
And necessarily so. In pre-recession days, most corporations didn't have to worry much about cash. "Corporate treasurers could simply go out and borrow money if the company was short," Janssen said. "There was no need for technologies, systems and platforms to be integrated with the organization to support cash forecasting."
That's changed dramatically today as suddenly cash-strapped organizations are trying to leverage technology to create forecasting information that's reliable and readily available, Janssen added.
Spreadsheets remain the most popular technology for forecasting, according to the Hackett study which shows that 69 percent of what Hackett calls top performing companies and 71 percent of peer group companies - companies that fall short of the toip performers -- always use Excel when it comes to projecting cash needs.
In Janssen's view, spreadsheets are less the adequate for this task. "Spreadsheets are the world's best way to screw up," he noted. So what's a better alternative? About 20 percent of top performing companies use custom built apps for cash forecasting, but Janssen says that many IT shops already have the capacity in place if they add forecasting modules to their extisting ERP systems. These he recommends highly. Only about 15 percent of ERP customaries are currently utilizing these modules, however, but with more businesses stressed about cash flow, that usage may pick up sharply.
Both SAP and Oracle provide these modules. The SAP ERP Financials, as an example, includes core accounting g and reporting capabilities with financial supply chain and performance management applications. "These applications help you streamline finance business processes, reduce operating costs, manage risk, ensure compliance, and provide robust and timely business insight," SAP spokeswoman Shabana Khan told CIOZone.
On a final note, Janssen says that more and more companies today are offering bonuses to CIOs and other executives for accurate cash forecasting.
Only registered users can write comments. Please login or register.