One of the most important tasks for any asset manager is accurately forecasting cash flows to ensure there is always enough liquidity to meet the fund’s needs. As part of active treasury management, forecasting provides an estimate of the inflow and outflow of funds, enabling more accurate financial planning and decision making.
Traditionally, cash forecasting is done manually with treasury teams poring over data and crunching numbers. The process involves collecting data from bank statements, counterparties, and other sources, manually entering it into spreadsheets, and then analyzing it to produce the final result. Like all manual workflows, it can be very time-consuming as well as error-prone.
Automation provides a better approach, making it possible for asset managers to streamline the process and achieve more accurate, consistent results. Here are five major benefits of automating cash forecasting:
- Higher accuracy: Manual cash forecasting is prone to human error, particularly incorrect data input, miscalculations, and incorrect assumptions. With automation, these types of errors can be greatly reduced. In addition, any discrepancies or outliers can be easily flagged for further review. This results in a more reliable forecast that improves active treasury management.
- Increased efficiency: Manual cash forecasting is time-consuming and requires significant resources to complete. With the help of automation, asset managers can quickly and easily analyze larger amounts of data and generate accurate cash flow predictions faster. Automating manual steps reduces both the time and resources required to complete forecasting.
- Enhanced data integration: Manual cash forecasting often relies on data from disparate systems, which can make it difficult to obtain a complete and accurate picture of a fund’s financials. Automated systems integrate directly with accounting systems, data providers, and banking systems, making it easier to capture a comprehensive picture of cash positions.
- Better insights and reporting: Automated cash forecasting gives asset managers access to real-time data, allowing faster response to market changes and more effective active treasury management. Generating reports on cash balances, cash inflows and outflows, and other key metrics becomes very convenient with an automated process in place.
- Improved risk management: Automated cash forecasting is key to identifying risk impact and developing an efficient risk mitigation strategy in advance. With real-time visibility into cash balances and transactions, asset managers can quickly address discrepancies and mitigate risks promptly. Automation also helps manage credit and counterparty risks, limit FX risks through smart hedging, anticipate cash requirements, optimize capital allocation, and identify variations in interest rates and commodity prices.
Automating cash forecasting enables asset managers to instantly upgrade active treasury management and gain a competitive advantage over funds that stick with time-consuming traditional manual workflows.
When selecting a cash forecasting solution, however, it is important to choose one that can be easily customized to meet your fund’s unique needs. IVP Treasury Management is an industry-leading solution that is designed for customization and can help asset managers achieve all the advantages of automating cash forecasting.
An active treasury management solution that tracks, controls, and optimizes collateral and margin management with a unique combination of best-in-class analytics and data tools.
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