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Why the future of cash forecasting is bright
A CLEAR OUTLOOK ON CASH FOR corporations
Hot predictions Good visibility Brilliant insights
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contents
Putting it all together
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Strategic cash forecasts are the future
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A new ecosystem is emerging
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Manual processes are going south
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The clouds are lifting
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The forecast is unclear
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Cash management is a rising priority
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Experience trading compliance with FIS
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Cash management is a rising priority (but under high pressure)
• Profitability • Solvency • Liquidity and cash management
DID YOU KNOW?
Insurance companies are more aware than ever of the wealth of information at their disposal. Their ability to extract value from data using advanced analytics has become critical to competitive advantage. For actuaries, the pressure is on to gain greater insights from big data and rapidly transform modeling results into business intelligence.
Luc Belpaire Senior Sales Solution Manager, FIS
The market is putting increased importance on anything that is liquidity related, and cash forecasting is a big element of that. Anything you can do to improve the forecasting process will be a leap forward.
1. PwC, Global Treasury Survey, 2021 2. Celent, Breakthrough Innovation in Cash Management, 2021 3. McKinsey, How Transaction Banks Are Reinventing Treasury Services, 2021
For the treasury and finance functions of complex companies, few topics get much hotter than cash management. Just ask the industry analysts. According to PwC, for example, cash and liquidity management is top of the agenda for treasurers and the second most important priority of CFOs. But not all priorities are easy to meet – cash management included. In fact, in its own recent study, Celent found that gaining accurate views of cash and future cash flows topped the list of operational challenges for corporate treasurers. Something’s got to give, believes McKinsey, especially when it comes to the forecasting side of cash management. As firms look to shift from reporting to predicting, “cash forecasting is regularly cited among the most inefficient processes by small and large organizations alike.”
the three cornerstones of finance
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With so much costly, inflexible IT to manage, your on-site infrastructure could be holding you back.
Rick Yuan Head of actuarial modeling and transformation, AIA Group
We needed to run a projection tens of thousands of times to come out with a range of possibilities. One solution was to purchase more hardware, but the obvious winner was move to the public cloud. The beauty is you can tap that capacity when you need it and switch it off when you’ve finished the calculation.
When cash forecasting processes are under par, you can usually expect poor visibility with a strong chance of inaccuracy and delay. Typically, four elements combine to cloud corporations' cash predictions.
Data issues: As the foundation of cash forecasts, data needs to be both accessible and accurate. But all too often, the many different data points you need will be locked in separate silos and fragmented across your business, or the data may need checking and cleansing before it can be used.
Business complexities: Once you have the right data, you must know what to do with it to make a cash forecast. Transforming invoices into cash flows, for example, means taking into account different payment terms and overdue bills. To cut through such complexities, you’ll need to apply simple business logic to the data.
Manual processes: For large corporations, managing all of the above manually creates an overcomplicated workflow. Once the right data has been gathered and transformed, it needs to be consolidated, reviewed, approved and ultimately compared with actual results. That’s a lot to ask of multiple, disparate spreadsheets.
Overburdened IT teams: With so many technical processes involved in cash forecasting, you’ll likely need help accessing or even interpreting the data. But you may be hesitant to involve your overworked IT team, or they may already be occupied elsewhere. You need a tech partner you can count on around the clock.
• Making intelligent use of data • Implementing business logic • Automating workflow • Working effectively with IT
Barometers of better cash forecasting
David Elliott Architecture manager for financial services, Amazon Web Services
For insurers, the question isn’t "if" (they will migrate existing applications to the cloud) – it’s how fast they can move and what are they going to move first?
4. FIS, 2021 FIS Readiness Report
Exciting developments in technology are creating far more favorable conditions for cash forecasting. With the power of advanced automation, artificial intelligence and machine learning, you can now streamline your processes to predict your cash position faster and turn educated guesswork into accurate short-, medium- and long-term forecasts. No more issues with fragmented data. Smart forecasting logic that helps you quickly and easily evaluate scenarios, analyze their impact and carry out variance analysis. And ultimately, more timely reporting and more confident decisions about cash. Welcome to modern cash forecasting.
• How can we improve funding? • What working capital savings can we make? • Is this really the best balance sheet structure? • When and where should we hedge?
Great questions accurate forecasts can answer
of capital markets firms are investing in digital technology to improve cash visibility.
32%
Managed cloud services give you the power and scalability of a sophisticated actuarial modeling and risk management platform, but reduce the challenges, costs and risks of provisioning infrastructure and managing the underlying IT.
Chief risk officer Major insurance company, UAE Cloud computing services come in three shapes
The accommodation of large data sets, highly demanding algorithms and the hardware for instant computational resources make the cloud ideal for large-scale data analysis.
Rather than making you hunt down data manually, the modern cash forecasting solution connects directly with enterprise resource planning, accounting and other systems to automatically pull in the data you need to build a forecast. After translating the data into cash flows using business logic, the solution will also connect and automate the workflows involved in submitting, reviewing and approving the results. Disparate spreadsheets are out; seamless interaction and collaboration are in. And with the most knowledgeable people from across your business now working efficiently together, forecasts are timelier and more accurate.
Nicolas Christiaen CEO, Cashforce
Corporations can overcome the problem of fragmented data by consolidating information from ERPs, AR/AP, policy administration, actuarial, treasury management and other systems, with pre-built connectors ensuring a seamless flow of high-volume, granular data. Collaboration across the organization is simple with easy-to-define workflows that result in an enterprise-wide forecast for consumption by treasury.
In 2020, unprecedented global circumstances have shown us all the benefits of hosted IT for business continuity and remote working. But beyond lockdown conditions, there are more reasons than ever to run your organization’s most powerful systems in the cloud.
Jonathan Silverman, director of insurance solutions, Microsoft
We've seen triple-digit rate growth yearon year in cloud adoption among insurers.
The modern cash forecasting solution adds value to treasury management by creating new synergies between operations and treasury. Now you can make sure the cash flows you report are totally true to your operations, by absorbing and translating millions of data points throughout the day and feeding the resulting cash forecasts straight into your treasury management system. With forecasts available by entity, currency, bank account, cash pool and so on, you can make faster, sounder decisions – and even benefit from unexpected insights.
• Save time • Improve accuracy • Gain valuable insights to improve working capital • Quickly reveal the root causes of issues affecting productivity and profitability
By integrating cash forecasting and treasury management, you will:
As regulatory requirements increase in volume and complexity, banks have realized that they can’t just add headcount. For example, the Liquidity Coverage Ratio (LCR), Net Stable Funding Ratio (NSFR) and Interest Rate Risk in the Banking Book (IRRBB) require much more substantial levels of analytics than the ALM and Liquidity reports of a decade ago.
What could such an ecosystem look like?
Werner Matula, head of Actuarial Services, Vienna Insurance Group
The cloud was pretty new to us and the discussions wentdeep, from a data security and regulatory and legalpoint of view. At the end of the day, it was about thisspecific pocket of risk modeling. We do not work withpersonalized data and we don't move any of our clients’data to the cloud.
By strategically centralizing, automating and integrating cash forecasting processes, you instantly get clearer insights into your liquidity and working capital position, and can more easily identify any surpluses, deficits or potential opportunities to save money. Within weeks of implementing a modern cash forecasting solution, one multinational company saw where it could make a multimillion-dollar saving – just by analyzing its working capital and seeing patterns in customer payment terms, methods and behavior. Another, smaller firm with revenue of just over $200 million made savings of $9 million. That’s $9 million it could add to the bottom line to help finance an acquisition or invest in new machinery. Isn’t it time you took a modern, strategic approach to cash forecasting and working capital analytics?
1. Make cash forecasting an immediate priority 2. Build a business case for the biggest return on investment 3. Plan a phased approach to deliver fast, tangible benefits 4. Start solving your data-related challenges 5. Drive insights that will benefit your whole business
Five steps to strategic cash forecasting
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FIS is a leading provider of technology solutions for financial institution and business of all sizes and across any industry globally. We enable the movement of commerce by unlocking the financial technology that powers the world’s economy. Our employees are dedicated to advancing the way the world pays, banks and invests through our trusted innovation, proven performance and flexible architecture. We help our clients use technology in innovative ways to solve business-critical challenges and deliver superior experiences for their customers. Headquartered in Jacksonville, Florida, FIS ranks #241 on the 2021 Fortune 500 and is a member of Standard & Poor’s 500® Index.
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