Creating Flexible Cash Forecasting in a Dynamic Environment
The Situation
A leading U.S. distributor of scientific supplies and equipment made several add-on acquisitions. As a result, the acquired companies were operating both semi-autonomously and in different stages of integration. They had disparate – and somewhat bespoke – systems with different levels and quality of data. The Company’s existing cash forecast was manual, time-consuming, and lacking in the necessary detail and accuracy required to give Management and the Board confidence in its outlook. Accordion was engaged to provide a detailed, short-term and long-term model that could incorporate the newly-acquired entities, as well as future acquisitions.
Services
13-Week Cash Flow Forecasting
Active Liquidity Management
Big Data Analytics
The Execution
- Initiated a discovery process across the organization to understand current situation, pain points, processes, and data gathering across all entities.
- Standardized available treasury data to ensure consistency between systems.
- Created a flexible model template for the core business, including consolidation methodology, and replicated this for current and future acquired entities.
- Ensured that all models were self-contained and driven by company-specific data and forecasts.
- Incorporated all available information to align cash forecast with the Company’s strategy.
- Developed scenario testing capabilities for key components within the model, including deep-dive analysis into functions and validation of key assumptions.
- Maintained simplicity of weekly update process despite the consolidated model requiring multiple entities to be forecasted separately.
- Constructed variance analysis capability at varying levels (entity, consolidated).
- Partnered with CFO to iterate on model results and provide a smooth transition with detailed documentation and process mapping.
- Presented model to Senior Management, Chairman of the Board, and the Sponsor to ensure alignment of needs.
The Results
Accordion provided the Company, Board, and Sponsor with a credible tool to view and manage their upcoming liquidity needs. By leveraging readily available information, our team helped the Company remove the guesswork and manual nature of weekly updates from the process. This created more time to analyze and dig into the detailed build-up of the forecast. During the process, the client recognized deficiencies in the accounts receivable function, as well as room for improvement in managing their accounts payable. The final deliverable allowed the Company to forecast weekly cash flow detail up to 52 weeks out and seamlessly incorporate new acquisitions into the model.