Cash Forcasting, the CCC and the distribution model

Question 1

Interest rates versus inflation

Answer 1

interest rate up, encourage saving, reduce saving, decrease inflation

Interest rate down, encourage spending, AD up, inflation up

Question 2

Gil Gadot 2014 on CCC and 3 benefits of good forecasting

4 benefits of good forecasting

Answer 2

Timely and accurate info needed to facilitate forecasting

Good forecasting means smoother operations, better investments and timely execution

1. Helps understand when you need cash,
2. helps meet known and unknown requirements
3. Liquidity management
4. Minimise cost

Otherwise unsure if can invest in higher yielding, and knows how much cash will be available/if more will be needed

Question 3

Issues with forecasting

Answer 3

Uncertainty and estimate accuracy

Question 4

5 steps in CF Forecasting

Answer 4

1. Identify payments due (what you must pay)
2. Identify receipts
3. Assess source of information
4. Ask if the numbers make sense
5. Look for patterns

Question 5

3 elements of information source analysis

Answer 5

Accuracy / accessibility / up-to-date?

Question 6

Patterns to look for

Answer 6

Degrees of uncertainty, historic, unusual transactions, distributions
Compare v. past and benchmark

Question 7

Ways to improve forecasting (Gadot 2014)

Improve DPOs and shorten DSOs techniques

Answer 7

Lockbox processing, electronic collections, virtual acocunts, e-invoicing

Factoring, reverse factoring, pre-shipment financing, post-shipment financing and payment guarantee