FECG Press Release

A recent survey of 200 companies by the Financial Executives Consulting Group LLC (The FECG) revealed that cash forecasting was the most important issue facing treasury professionals in 2005. The importance of cash forecasting was consistent across the spectrum of survey respondents, regardless of their sales size or complexity of operations (e.g. number of countries with operating units, use of hedging transactions, etc).The size of the companies responding ranged from small (sales under $250 million) to large (sales over 4 billion)

Rounding out the top 5 issues of importance to Treasury were:

Cash forecasting
Managing working capital
Acting as internal consultants to others in the company
Increase Treasury’s visibility within the company
Seek out a role in the company’s strategic planning process

Based on the survey results the largest impediment to effective forecasting was the constant need to devote treasury’s “scarce resources” (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 company’s 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 unit’s 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 company’s senior financial staff. We assist a company by providing them with financial advice or staff on a permanent or project basis.

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