Cash management and forecasting are more difficult than ever, but they are more important than ever as well. Increasingly, companies recognize that improving the speed and accuracy of cash reporting and forecasting can catalyze growth. In turn, this recognition is putting pressure on treasury functions to be “best in class.”

These are key themes from a CFO Research study of finance and treasury leaders from large companies around the world. The study, sponsored by SAP, surveyed 371 senior executives from finance and treasury departments at companies with a minimum of $250 million in annual revenues.

Large majorities of the executives surveyed believe that for their companies to succeed in the future, management outside of treasury will need a better understanding of the company’s cash position and forecasts, both across all groups and business units (83% of respondents agree) and for their own individual functions or businesses (82% agree). Keeping the information within the confines of the treasury function itself undercuts the value of the data to the company at large.

cash reporting 16Mar_FN_p46Consequently, the treasury function will need to be even more involved than before with their business colleagues. Six out of 10 respondents (62%) say that the treasury function will need to increase its contribution to high-value planning, analysis, and decision-support activities over the next two years. Only 6% say that they don’t believe treasury needs to contribute to high-value activities. (See Figure 1.)

And speed is a factor as well. Eight out of 10 respondents (80%) are looking for their treasury function to prepare cash reports and liquidity forecasts much more quickly than they are currently able to.

Priorities for Action

A large number of finance executives in the survey say that their companies’ top priorities include cash management activities — improving the accuracy, consistency, and quality of cash data (34%); improving the accuracy of cash forecasts (34%); and providing real-time access to consolidated cash information and analyses (33%). (See Figure 2, below.)

However, one difficulty is simply giving cash management the attention it deserves. As Figure 2 shows, even larger numbers of respondents rate improvements in each capability as important, but these capabilities are also competing with a company’s many other priorities.

16Mar_FN_p47Managing conflicting priorities was a common theme among respondents. Nearly 6 in 10 (58%) say that their treasury function is under-resourced and will require additional resources over the next two years, and an even larger number (72%) say that their company’s treasury function is now under more pressure than ever to reduce its costs. And these challenges are only going to intensify, respondents say.

So the ability to “do more with less” may go a long way toward maximizing the value that treasury can provide to other business managers. At the minimum, simply spending less time wrestling cash data from all of a company’s separate accounts and business units can translate into spending more time adding value to cash analyses and forecasts.

The Complexity Challenge

A majority of finance executives (63%) say that, compared with five years ago, they now find it more difficult to manage cash efficiently and effectively.

For some respondents, company success is part of the problem. More than 6 in 10 (62%) say that the size and complexity of their own companies make it difficult to develop accurate views of the company’s cash position and forecasts across all groups and business units. Increased complexity can also come from having more legal entities, more complex businesses, more complex product lines and selling behaviors, an increasing number of operating geographies, or all of the above.

And more than 8 in 10 (83%) conclude that increasing complexity in their businesses has made it more difficult to manage cash efficiently and effectively. Specifically, 57% say that the number of different information systems in use at their companies makes it difficult to develop accurate views of cash positions and forecasts across all their groups and business units. Looking forward, three-quarters (76%) believe that business complexity is likely to get even worse over the next two years.

Pain Points

More than 6 in 10 (63%) rate complexity of the company’s business as either a substantial or a moderate obstacle; the same number (63%) say that increased regulatory pressure presents obstacles; and 58% believe that it takes too much time and effort to collect data from across the company’s accounts and prepare accurate cash reports.

In addition, two-thirds of respondents (66%) agree that developing accurate views of the company’s cash position and forecast across all groups and business units already requires an excessive amount of manual intervention. But few of the executives surveyed currently have real-time response capabilities in place — that is, interactive, self-service interfaces — for either aggregating cash balances (12%) or preparing consolidated cash forecasts (8%).

One-quarter of the respondents (25%) report that it takes approximately half of a business day to aggregate cash balances from their global bank accounts, and even more (30%) say it takes one full business day or longer. Similarly, 23% report that it takes approximately half a business day to prepare a consolidated cash forecast, while the largest number — 43% — say it takes one full business day or longer.

Speed of Thought

In sum, respondents feel that time spent on simply collecting, conforming, and preparing cash data comes at the expense of providing additional insights and expertise from the finance function that can support better decision making throughout the company and drive growth.

Most believe that leading technology is a key enabler of making the shift to higher-value analysis. However, most respondents (56%) also believe their company’s information systems and tools for cash management are only “adequately” equipped to accommodate Big Data — that is, much larger and unstructured data sets. And one in five (21%) believes their systems are less than adequate.

To provide the high-quality cash analyses at the speed required for success, companies must find new ways not only to get faster — by reducing the time and effort it takes to prepare and deliver cash reports and forecasts — but also to get better, by delivering more insightful, more immediate, and more forward-looking cash analyses into the hands of the business’s decision makers.

In an increasingly difficult business environment, real-time response capabilities will allow a company to operate at “the speed of thought” and provide a crucial competitive edge. Coordination and alignment across the business will be needed to optimize decision making, and treasury functions will be called on to deliver accurate and comprehensive cash information into the hands of the managers making business decisions almost immediately.

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