Using Anaplan for Cash Flow & Liquidity Planning

Given what has unfolded in recent years, it’s no understatement to say that we are living through what could potentially be the most disruptive and uncertain period of our generation, from Brexit, to COVID-19 and even disruptions such as the 2021 Suez Canal blockage.

The life of corporate finance teams, controllers and CFO’s is no doubt be very challenging and in such a volatile environment, the type of new information that can have a transformative impact on cash flows is released very regularly. Therefore, the need to be able to quickly and easily refresh forecasts is of vital importance.

However, if the cash forecasting processes are manual and administratively heavy, a speedy refresh is not usually possible without throwing bodies at the problem. It means that during periods of volatility you are taking highly qualified personnel away from high-value activities and reallocating them to administrative work when their ability to make rapid strategic and operational decisions is hamstrung at the time it is needed most.

Some businesses have seen dramatic changes in demand in recent times (FMCG, CPG, Online, etc), which on the face of things looks rather positive, but translating that demand into serviced stock and having adequate working capital to replenish inventory to capitalise on the increase in demand can become overwhelming very quickly. We need our best heads making strategic decisions with suppliers by being proactive rather than reactive in their ability to model ‘what if’ scenarios incorporating macro and microeconomic factors, not spending the bulk of their time buried in offline processes.

Unfortunately, on the other side of the coin, some businesses have challenges maintaining their operational performance, which would have a dramatic impact on their cash management. It is even more critical for these organisations to stay in control and stay proactive in their decision-making processes.

To state the obvious, a cash flow forecast is a projection of an organisations future financial position based on anticipated payments and receivables, so essential to that will be regular review of and contact with existing debtors to get a feel for likely payment dates to feed into scenario planning and forecasting. How might a delinquent invoice or customer impact your cash flow and liquidity, even more polarised in these volatile times? Managing staff costs, and in the worst-case modelling overhead reductions. What overheads can be delayed, reduced or avoided?

Covenant forecasting, debtor finance or any other financial initiative mechanism can be modelled and aligned with existing working capital models. The ability to plan across multiple time horizons, whether short term; showing cash required to fund working capital or longer-term; showing cash required to fund longer-term growth strategies and capital projects.

Even modelling of some of the government schemes introduced during the recent pandemic. VAT deferment, government-backed funding, the furlough scheme, which to any cash forecasting process could be a life raft.

These are just some of the supporting models to a Cash Flow which are not revolutionary topics, but the power is in the control, in the single source of truth, in the ability to change a single micro or macro effect and understand the real-time impact it has on a cash position, in the ability to simulate multiple scenarios and make immediate strategic decisions.

To find out how one of our customers, Casella Family brands navigated recent changes, watch our on-demand webinar.