The Guide to Global Cash Forecasting

Operating a business with global operations can be complicated, and cash forecasting is a notoriously difficult, but vital part of any treasury function.

As companies expand globally, cash forecasting gets even more difficult as one has to factor in multi-bank management across countries, interest rate and currency risks, as well as cross-border tax liabilities.

In this guide, we'll walk you through how you can build a robust global cash forecast, despite the challenges at hand.

Global Cash Positioning

Cash positioning is the process of determining and keeping track of how much cash a company has and allocating it toward accounts and operations.

Cash positioning is crucial for any company, as it ensures there is enough readily available cash to cover daily expenses, respond to opportunities, and meet financial obligations, providing stability and flexibility in decision-making.

While calculating how much cash you have might seem obvious, as ‍companies grow, and have multiple financial accounts, across entities, countries, and currencies, getting a real-time view of your cash position, can be challenging.

Many companies, end up having to manually log in to multiple accounts, and track cash balances in a spreadsheet – as your cash footprint and complexity grow, this can end up becoming a very manual and time-consuming process.

That's why it's especially important for global companies to have an accurate and real-time cash positioning function from day one.

Analyzing Cash Flows & Trends

A good treasury function should not only be able to observe cash balances but also cash flows across all of a company’s financial accounts with a high degree of precision.

Without a view into money movement and transactions, it's hard to get an accurate insight into cash trends, key financial risks, working capital needs, as well as revenue and cost drivers. More context enables better forecasting, which enables better decision making.

At Vesto, we built our cash positioning product to help companies do exactly that: connect all of their financial accounts to gain access to their real-time cash position, across accounts, entities, and currencies in one unified dashboard. On top of visibility into balances, we also enable companies to view all of their transactions across accounts with powerful search and filtering features, allowing you to extract valuable insights and data.

Examining historical cash trends to identify patterns and understand the company’s cash flow dynamics can often provide valuable insights into the factors influencing cash fluctuations.

Collaborate Across Departments

Ultimately, an accurate cash forecast can’t be done in isolation. Context from various departments enhances the accuracy of forecasts – try incorporating insights on upcoming projects, sales forecasts, and operational plans. As your company scales globally, having context at a group-level becomes even more important.

Consider FX & Economic Factors

One common pitfall that leads to inaccurate global cash forecasts is the lack of factoring macroeconomic conditions, exchange rate fluctuations, and other economic factors that can impact the company’s cash flow. A thorough consideration and forecast of external influences contribute to a more comprehensive and realistic forecast.

Scenario Analysis

Finally, perform scenario analysis to model different financial outcomes. No forecast will ever be fully accurate, so by creating several scenarios, you can better assess the impact of potential risks and uncertainties on your cash forecast, enabling proactive decision-making and risk mitigation strategies.

Takeaways

In conclusion, managing a global treasury function can be a complex task, but with strategic cash positioning, analysis of cash flows and trends, collaboration across departments, consideration of economic factors, and scenario analysis, it is possible to build a robust global cash forecast.

Further, using tools like Vesto’s cash positioning product enables you to more accurately operate your global financial operations. If you are operating a business with global operations, consider integrating Vesto into your treasury function – reach out to us, or feel free to book a demo with our treasury team for a free consultation on your global treasury ops.