When a commodity is in scare supply we worry about it. Concern over cash is shared by governments, organisations and individuals. And while we all may directly or indirectly enjoy the benefits of quantitative easing, printing your own money is, sadly, not an option open to treasurers in the real economy. In this recession-shaken place, reliance has to be placed on more tried if not trusted methods.
Cash management was a task of enormous importance and some complexity even before it became an agenda item for the boards of so many companies. For instance, supermarket chain Morrisons, featured in this issue, handles £7bn a year in cash. It seems that even though many of us have exchanged plastic for notes and coins, old-fashioned money is far from on its way out. Whether corporates are paid cash in hand, by credit card or transfers into their bank account, the need to have a handle on cash in its various forms remains the same.
In autumn 2008 the ACT held the first in a series of working capital conferences. One of the messages that delegates in Manchester heard that day was the need for good forecasting, both short-term and long-term. Cash-based forecasting should be one of the key management tools in any business, ensuring that there are no nasty liquidity surprises around the next bend. That message has been repeated in articles in The Treasurer and this supplement and at ACT conferences since that time. The clear but implicit message is that forecasting is one of the most difficult tasks on the treasurer’s to-do list.
The truth is that with companies facing a seriously shrinking economy and increased volatility, the most carefully prepared forecast can easily fall flat on its face. But that doesn’t mean treasurers should give up trying to improve the quality of the forecast work they do. Rather, they should do that most difficult of tasks: learn from their mistakes and try to do better next time.
PETER WILLIAMS
Editor
