Forecasting Failures Continue to Thwart Cash Managers – Report

The difficulty of cash flow forecasting and the unpredictability of cash balances is a major challenge for corporate treasurers in managing working capital requirements, according to new research conducted by BDRC for ABN AMRO. While 82 per cent of respondents said cash flows could be predicted with reasonable accuracy up to two to three days ahead, this fell to 72 per cent for a week’s horizon. Respondents said that account receivables, the timing of payments and non-centralised cash management activity are major factors impacting the predictability of cash balances and influencing investment decisions. This challenge is illustrated by the fact that one in four corporate treasurers rate access to liquidity as the top priority in managing short-term cash positions, with only one in ten rating returns ahead of liquidity. The research indicated a growing demand from corporate treasurers for more flexible investment and liquidity options to accommodate the unpredictability of cash balances. Phillip Lindow, Executive Director, Liquidity Management at ABN AMRO commented: ‘Our research sends a strong message to providers of liquidity management services. Corporate treasurers want access to flexible investment options that can optimise returns (interest and yield) without compromising liquidity or increasing risk. This is reflected by the growing interest in high yield current accounts and money market funds that combine convenient access, daily liquidity and the potential to enhance returns.’


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