Cash Flow Forecasting & Stabilization

Sometimes, the business environment may take a turn for the worse, driven by either a temporary shock or a structural change in industry dynamics. A sudden reduction in demand can leave companies vulnerable, especially in case of a high fixed cost base or significant debt obligations.

In such times, businesses need to be agile to move into cash preservation mode to secure sufficient liquidity for daily operations whilst preparing a longer term budget planning in the background.

Having a robust short-term cash flow forecast in place, typically prepared on a 13-week or 17-week basis, is important in any stage of the business cycle. However, for businesses experiencing financial stress or distress, this is often the number one tool for survival.

Obtaining a solid grip over the short-term cash flow forecast helps businesses understand the expected cash inflows and outflows, any risk assessment to the forecasts and potential upside initiatives to accelerate cash collections and manage outlays.

KPMG in Vietnam and Cambodia helps companies review, enhance or develop short-term cash flow forecasts. When times are challenging, we also provide hands-on support to monitor these forecasts versus actuals, install cross-functional cash governance, generate and implement liquidity enhancement initiatives and financial performance stabilization to pave the way for a return to profitability.

• Our client was a major company seeking to install a leading practice cash flow forecasting suite to ensure visibility of cash flows across all its entities.
• The client wanted to obtain a view on both short-term weekly cash flows and the longer-term annual cash flow outlook.

• We analyzed our client’s general ledger and trial balance to identify all cash flows and balance sheet posts. We prepared a driver tree framework to identify the drivers underpinning each cash flow line item.
• Based on the driver tree framework, we established a forecasting methodology for all cash flows, based on the direct cash flow forecasting method driven by receipts and payments.
• We developed two agile models for our client to forecast short-term cash flows and annual cash flows, respectively. The short-term model allowed for forecasting weekly cash flows for a rolling 13-week period, whilst the annual forecast was for a fixed yearly period on a monthly basis.
• Our models allowed for a combination of balance sheet unwinding, driver-based forecasting and manual input from business stakeholders to achieve the most reliable results.
• Besides the models, we developed a dashboard to provide visibility into key ratios and trends regarding cash management. We also supported our client to define ways of establishing the minimum safety cash balance required for daily operations.

• We delivered a comprehensive 13-week short-term and fixed-period annual cash flow forecasting suite for our client, allowing them to manage and monitor cash and working capital performance going forward.
• We provided our client with an interactive management dashboard to interrogate the forecasting outputs and manage the business.
• We provided training to the client’s Management and key stakeholders to enable them to fully utilize the developed tools.
• We also performed a rapid cash and working capital optimization diagnostic for our client to identify cash release opportunities.