Without it, most companies are forced out of business, or at best to take drastic, usually expensive measures that often result in a similar outcome anyway. That’s why the ’L word’ was emphasised in so many sessions at the AFP (Association for Financial Professionals) annual conference in Philadelphia this week.

This theme has only gained greater strength amid recent crises like the pandemic and earlier financial upheavals such as the world saw in 2008-09. And now with interest rates rising rapidly thanks to continued Federal Reserve increases - and the US dollar’s attendant increasing strength as a perceived safe haven for investors - a tough, often multi-faceted question looms large in treasury departments everywhere: what can companies do to determine, much less predict, how much cash they have to fund operations, to spend on capital projects or acquisitions, or, ultimately, to allow them to stay in business?

Bob Stark of Kyriba shared some answers on what he and his colleagues are hearing, and seeing, on this topic, notably from CFOs and treasurers of large corporates and middle market companies where the San Diego-based cloud finance and treasury solutions provider plies its trade. And it’s all about the cash…"How much do we have? Where is it? How fast can we get it? And how much will we have next quarter, next month, next week, or tomorrow?"

Stark is the global head of market strategy for Kyriba. Finextra caught up with him at the conference to dig a little deeper into points he shared in an earlier AFP session, one of three in which he participated during the event – Modernising Liquidity and Investments for a Resilient Treasury. Stark was part of a panel with experts from American Honda Motor Company, MetLife, and ICD.

To start our conversation, he pointed out the facts and reality of the current economic environment in wry understatement. “Forecasting in a low interest rate environment is done at different levels of emphasis than we’re seeing now.”

“I [wouldn’t] want to say it’s the same as 2008/2009. But there were some similarities in terms of what treasury was asked to do [back then vs. now.]” When asked to give some examples, Stark continued.

“The CFO and the board [were and are] looking for how much liquidity do we have left? How many days of survival do we have? That sounds very dire, but you know, two and a half years ago, there were some concerns about what ‘next’ looked like.”

“And so, these were the sorts of metrics and data that trickled down pretty fast, to the Treasury team, say, what does our cash balance look like right now? Right. What’s our liquidity look like? What lever can we pull to increase our cash balance?”

That’s easier said than done. Stark pointed out it’s really tough to do liquidity forecasting in any environment. But there is some good news: While he noted their customers and prospects are facing different challenges now in a world of rising rates than during the pandemic or in prior crises, those bumps in the road can still be addressed much more efficiently with new and powerful tools his company and other providers have developed for finance teams to use in forecasting cash flow.

We know the drill. Suppliers want their money; they want to get paid. Companies are looking to their customers to pay them too. Sometimes simultaneously. “Exactly” said Stark, and he said they are considering all scenarios, but they really need the data to help them make intelligent decisions. And that’s exactly what treasurers can do with the right tools.

“It comes down to that detail level, where operationally the treasurer has to push upward. Say, ’Here’s what our balance is, here’s what our (cash flow) projections are, here are the assumptions we’re working with. And to feel confident they can get answers.’"

While circumstances have changed from mid-pandemic, best practice using advanced liquidity forecasting methods, like Kyriba’s enterprise liquidity planning and modeling tools, is here to stay. Stark says many treasurers can’t and wouldn’t want to go back to earlier days where these dashboards and models weren’t yet available. “They [and their CFOs] are saying “Wow, this is really good insight [...] yeah, we’d really like to keep seeing this”- thus proving the lasting, crisis-or-no-crisis value of the new data and detailed reporting to the enterprise.

And international business brings another full level, or two, or three, of complexity for treasury.

“There’s a global component where suddenly the dollar has been so darn strong that even when their forecast reporting is on a constant currency basis, they still like it [to be available.]

“And the other part that they have to disclose gets bigger and bigger and bigger.” Referencing the liquidity session he’d been part of, Stark said: “We talked about different ways to manage currency volatility, not necessarily just the strength of the US dollar, but the volatility.” He said it was shocking just to see a chart comparing recent annual FX hedging exposures, sporting huge swings in the costs for treasurers to use these tools at various points over the past few years.

Stark says businesses operating overseas often find that unfamiliar financial factors are involved. And these triggers often don’t move in concert. “The Fed raises rates, but ECB doesn’t necessarily at that point in time. [This results in a] mismatch. So, you just get this ping pong effect.” Which, he pointed out, leaves treasurers jumping for information and solutions and CFOs asking lots of questions about liquidity. More data is always helpful, better data even more so, in planning immediate actions and potential further steps in such situations.

In fact, Stark says, when treasurers answer those cash flow questions for their managers, they are invariably asked lots of “what about” questions afterward, like “What about this? And What about that?” referring to other related line totals in the liquidity reports, and more importantly, how to pinpoint the data used to support them. He noted that it’s more critical than ever for financial managers to be able to prove the sources of reported figures on liquidity and cash flow projections, because over time, being able to clearly and consistently show these as part of the ‘picture’ to senior officers and staff builds top-down and front-line credibility and comfort with finance team forecasts. Automated liquidity forecasting helps treasurers do a better job, meaning, Stark says “they can shift their time [to other more productive pursuits] from trying to figure out how to build whatever report or dashboard that they need to have - and [the numbers] start to make sense.”

Something else that makes lots of sense, Stark emphasised, is adding faster and more useful decision-driving tools like liquidity forecasting on a modular, cloud-based subscription basis to existing payments, risk management, and other functions that treasury departments use.

Summing up what he feels are the principal advantages of today’s off-premise treasury and liquidity management offerings vs. their on-site forebears, Stark said that the pandemic and ever-improving technology played a central role in accelerating the pace of conversion to new and better [and cheaper] software platforms, offering much more bang for the treasury or cash manager’s buck. And not just for multinationals, either.

“These questions around forecasting are not unique to big companies. And in fact, the ability to run things in the cloud much more cheaply and efficiently means that the total cost of ownership [for any organisation] is way lower than it used to be.”