Four out of five of the world's largest companies are unable to accurately forecast mid-term cash flow, according to a new study by The Hackett Group, its REL working capital division, and the National Association of Corporate Treasurers. This uncertainty creates a potentially dangerous scenario when combined with shrinking levels of cash on hand in most industries, plummeting revenues, reduced margins, and limited availability of credit and cash from other external sources.
"The bottom line is simple -- you can miss the mark on sales or earnings forecasts occasionally and survive. But you can only run out of cash once," says REL President Mark Tennant. "This study clearly details the practices and procedures that companies can use to avoid a calamity and get a handle on this key area. Companies would be well advised to consider whether they're leaders or laggards here, and how they can make changes to improve cash forecasting accuracy."
