Rounding out the top 5 issues of importance to Treasury were:
Managing working capital
Acting as internal consultants to others in the company
Increase Treasuryâs visibility within the company
Seek out a role in the companyâs strategic planning process
Based on the survey results the largest impediment to effective forecasting was the constant need to devote treasuryâs âscarce resourcesâ (i.e. its staff) to cash processing tasks. With most treasury functions among the surveyed companies having less than 5 staff members they depend on cumbersome spreadsheets and emails to collect, process and distribute cash related information. The survey found that a companyâs treasury area was too consumed with the present to worry about forecasting the future.
Another impediment to cash forecasting was the lack of performance measures that measure an operating unitâs use of working capital or cash. Most operating units are measured on some form of EBITDA which, by definition, excludes the very real cost of cash (i.e. net interest expense).
The survey also revealed that there were a minimal number of treasury efforts underway to improve this vital "peek" into the future. Companies without an effective cash forecasting process run the risk of over borrowing in a rising interest rate environment or being caught short of funds because their forecasting processes are only correct once a month (i.e. when the accounting cycle closes).
The FECG is a financial consulting firm that assists companies improve the effectiveness of their Treasury, Tax, Controllers and Audit functions by serving as advisors to CFOs and other members of a companyâs senior financial staff. We assist a company by providing them with financial advice or staff on a permanent or project basis.