Tools to Enhance Cash Flow Forecasting

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Tools to Enhance Cash Flow Forecasting

• Bank of America
• Cash Flow Solutions

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Is this your first time to New Orleans?
Polling Question

• Yes
• No

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Overview

• Effective Cash Flow Forecasting
• What are the strategies, tools and best practices
  for more effective cash flow forecasting?
• How can the use of the right receivables and
  disbursements solutions improve
  information reporting, cash flow predictability
  and enable proactive cash management?
• What are the techniques to minimize excess
  balances, manage float and make strategic
  short-term investments for maximum returns?

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Polling Question
In terms of effectiveness, our cash flow
forecasting is
In terms of effectiveness, our cash flow
forecasting is

• Extremely effective
• Somewhat effective
• Not very
• Not at all

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Principles of Cash Management

• Bring in the cash as fast as possible
• Collection
• Concentration
• Using the appropriate treasury management tools
• Use the cash for obligations
• AP, Payroll, Debt Service, etc
• Using the appropriate treasury management tools
• Hold on to the cash as long as possible
• Full Range of allowable investments
• Goal Safety, Liquidity Maximized Return (not
  mutually exclusive)
• Underlying all of this Efficiency
• Can foreseeable patterns be created?
• Can I increase my confidence in the cash forecast?

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Polling Question
How are you currently managing and forecasting
your cash flow?

• Purchased system/software
• Proprietary system/software
• Excel (or similar tool)
• Other

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Find More Cyclical Patterns Sample Cash Flow
Statement (Data taken from Bank Account Credits
and Debits)
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Polling Question
In terms of adopting new ideas/technology for
cash management, my organization
Tends to be an early adopter and expeditious
implementer.
Tends to be keenly interested in new
ideas/technology but waits until others have
proven its function before committing resources.
Tends to be somewhat cautious with new items and
sometimes slower to implement.
Tends to be extremely cautious with implementing
new ideas and new technology.
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Polling Results
In terms of adopting new ideas/technology for
cash management, my organization

• Early adopters
• Interested
• Cautious
• Wait and see

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Analysis Charts
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Typical Tools Data Sources for Cash Flow
Forecasting

• What do you use?
• Receipt Forecasts
• Disbursement Forecasts
• What can be done differently to either
• Increase accuracy or timing of information
• Change patterns
• Speed up availability and/or hold onto money
  longer

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Consider Alternative Cash Management Tools -
Receipts

• Goal Understand the day-to-day activity and
  trends associated with major receipt streams. We
  will look at the tools you are currently using to
  collect the cash. Ask the question How can we
  collect our receivables quicker, more
  efficiently, and with greater predictability?
• Analysis Documents Bank statements for major
  receipt accounts and analysis statements over the
  past 12 months.
• Possible Receipt Tools
• Check Transformation (Check 21)
• Electronic (ACH, Wire)
• Lockbox
• Merchant Services
• Web-Based Receipts
• Funds Concentration

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Polling Question
Where do you stand in implementing Check 21
technologies?

• Fully implemented
• Somewhat
• Starting up
• Not at all

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Comparison of Receipt TM Tools
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Check Truncation
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Creating More Predictable Streams
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Comparison of Receipt TM Tools
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Creating More Predictable Streams
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Creating More Predictable Streams
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Consider Alternative Cash Management Tools -
Disbursement

• Goal Understand the day-to-day activity and
  trends associated with major disbursement
  streams. Look at the tools currently being used
  to disburse cash. Ask the question What can be
  done to disburse cash more efficiently and with
  greater predictability?
• Analysis Documents Bank statements for major
  disbursement accounts over 12 months. Analysis
  statements for the same accounts for the same
  period.
• Possible Disbursement Tools
• Electronic (ACH/Wire)
• Purchasing/Travel Cards
• Virtual Cards
• ZBAs Controlled Disbursements
• Fraud Protection

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Polling Question
What percentage of your funds are disbursed
electronically?

• Over 75
• 50 to 75
• 25 to 50
• Under 25

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Typical AP Disbursement Trends
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Creating Predictability out of Chaos
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Creating Predictability out of Chaos
ACH, Wire, Electronic Payment
Pay these vendors weekly
Virtual Credit Cards - All purchases between
1,000 - 5,000
Pay vendors daily, Pay bank monthly
Standard Purchasing Cards - All purchases under
1,000
Pay vendors immediately, Pay bank monthly
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Tools for enhancing forecasts

• Analyze historic cash ebbs flows
• Find cash trends when did money come in or go
  out and how much
• Find method of receipt or disbursement
• Match treasury management tools to
• Receipts different streams may need different
  tools
• Disbursements look at electronic payments
  pegged to specific outflow dates (rather than
  disbursing money daily)
• Use tools that will make more foreseeable inflows
  outflows
• Track changes of trends over time
• New more predictable patterns emerge
• More timely information available
• Incorporate these into forecast

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Pointing to your cash investment

• Accuracy of information, capturing trends and
  creating predictability of your cash flow allows
  greater assurance of successful short-term
  investment without jeopardizing appropriate
  liquidity levels.
• Have correct investment tools in place for a
  normal yield curve environment.

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Polling Question
Do you have multiple investment options for your
cash management needs (e.g. money market, cash
plus, enhanced cash, ultra short, etc.)?

• Yes
• No

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Polling Question

• Do you ever place assets in longer-term
  investment products in search of higher returns?

• Yes
• No

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