According to a recent study done by PricewaterhouseCoopers (PWC), the biggest challenge faced by Treasurers is cash flow forecasting. The process for cash forecasting hasn't changed very much over the past decade. In order to produce forecasting reports, Treasurers embark on an odyssey: logging in and out of several bank accounts, collecting data from multiple systems and departments, communicating with people at the corporate and local level, ultimately filling Excel spreadsheets with endless amounts of data. It is striking that in the age of automation this tedious process is so widely accepted, and that the most popular cash forecasting tool is one that was released the same year that Coca-Cola released “New Coke”.
Spreadsheets are a great tool, but their application in cash management is manual and extremely outdated. This is why, in the age of digital transformation, programs like Excel are being phased out in favor of automation technology. The three biggest areas of concern for Excel’s use in cash management are: the visibility gap, user error, and inefficiency.
Spreadsheets create a visibility gap, which is essentially a blind spot in a Treasurer's cash management. A Boston Consulting Group survey found that, "Only 50% of bank Treasurers have daily insight into the entire banking book." Meaning that 50% of Treasurers are left to play guessing games with their daily cash position. Not having a solid grasp of how much cash is on hand leaves you susceptible to overdraft fees, bounced checks and could ultimately lead a business to failure.
In addition, the highly manual aspect of spreadsheets leave them vulnerable to user error. In the case of an Excel forecast, by the time an error is caught it is usually buried under layers of data across multiple spreadsheets, making the mistake difficult to find and correct. Management uses cash forecasting reports to predict future cash position and other pillars of financial health. In small and medium businesses (SMBs) and startups, minor errors in these spreadsheets can be catastrophic. According to The Telegraph, at the London Olympics a staff member erroneously typed “20,000” into a cell that should have stated “10,000”. As a result the London Olympic Committee oversold 10,000 tickets to four minor heats of synchronized swimming. By the time the committee realized their mistake, they were forced to upgrade the surplus ticket holders to major swimming events. While it is true that all forecasts are subject to a certain degree of error, with digitization the level of human error can be significantly reduced.
Lastly, spreadsheets are an extremely inefficient method of cash management. The Excel forecasts require an obscene amount of manpower and time. The data necessary to build a proper forecast is shared between multiple departments at corporate and local levels. Coordinating between these departments is time consuming and taxing. But wait, there's more! Once all the data finally is located and compiled it must be standardized. For example, cash coming from banks in the United Kingdom and Italy would come in Pounds and Euro respectively. These numbers would then need to be converted to a standardized currency. A case study done by PWC found, “A Fortune 100 multinational implemented RPA to automate the daily cash positioning of their in-house bank and eliminate repetitive human input. This allowed the team to free up 1.5 hours a day for one person to focus on strategic projects and analyse investment decisions.” The time taken up by data entry is time that could be used to analyze the results of these reports to plan for future cash position and strategy.
Despite its many flaws, most Treasurers utilize spreadsheets because their companies can't afford a Treasury Management System (TMS). Traditional TMS involve an intensive multi-month integration and steep financial investment, leaving them out of the reach of SMBs and startups.
Luckily, Treasurers now have another option, Trovata.
Trovata is JP Morgan backed software that automates key aspects of cash management, reporting and forecasting. You no longer have to input and copy data from spreadsheet to spreadsheet because Trovata consolidates information from banks, ERPs, and Excel under one platform. Trovata gives you an intuitive dashboard for easy to-the-minute custom reports and forecasts; which enables easy access to analysis. With Trovata you can even set up automated reports. You can then send those reports out at intervals, to individuals of your choice.