The Use of Technology in Finance

THE USE OF TECHNOLOGY IN CORPORATE CASH FORECASTING

Debra Walker Hearn

Finance 610

Dr. Natasha Delcoure

July 31, 2011

Abstract:

The following briefing discusses the components of the cash forecasting process which includes forecasting horizon, cash flow components, and forecasting methods. In addition, it explores the impact of technology in corporate cash forecasting modeling. Further, the briefing highlights how cash forecasting impacts senior management decision-making processes within my own organization, Federal Realty Investment Trust (traded as FRT on the New Your Stock Exchange).

The Forecasting Process

Forecasting cash flows is one of the most important tasks of cash management. Unlike Financial Statements, Cash Forecasts provide detailed information concerning a company’s future cash flows. Cash Forecasting tracks both collections and payments. A forecast report summarizes the information as inflows and outflows over a specific period of time. Cash Forecasting can be modified to become more detailed daily or weekly cash forecast for actual cash controls for the organization. The cash forecast can validate whether or not the funds required to meet the company’s goals can or cannot be met. Obviously, this information is useful to know as soon as possible so that steps can be taken to scale back operations, if needed. That is why, the use of technology is essential in the cash forecasting process.

Development of a particular forecast depends on many factors such as the forecast horizon, the company size and its industry, structure of information, and forecasting tools. The objectives and value of predicting cash flows include:

1. Liquidity Management – use for scheduling investment maturities and anticipating borrowing requirements which are essential forecasting a company’s net cash position at different intervals.

2. Financial Controls- Early identification of variance analysis allows a company...