Cash Flow | statutory report to operational roadmap

Over the last few months, we have noticed a strong focus on cash flow reporting and forecasting, undoubtedly accelerated by the Covid crisis. There is a demand for cash flow reporting as a management tool rather than just as a statutory report. In this blog I will focus on how to make that transition.

The traditional pattern is to build cash flow reporting in the consolidation/planning tool – the EPM layer (Oracle HFM, EPBCS, Onestream, etc) – and to load month-end close data from the ledger(s) into said tools. The advantages with this approach are:

a) it allows you to clutch between various ledger charts to a single standard in the EPM tool;

b) it allows you to enrich your ledger data manually to explain your cashflow; and

c) it provides a neat route into forecasting.

However, this solution on its own does not support using cashflow to make management decisions or to understand the cash flow drivers in the business. To achieve this objective, we need access to the detail available in the ledgers and sub-ledgers, and a report that can be run on an operational cadence rather than just retrospectively at month-end. This could be as simple as analysing cash flow by an existing chart segment, say sales channel and understanding how to improve the sub-ledger posting rules to improve the quality of the data. Or we could look to align our cash flow reporting with how we run our business. For retail organisations, there can be real value in weekly reporting, in construction firms, the value may be in project-based reporting.

I think most business already have a good idea of what improvements to cashflow reporting would improve their decision making. What is helpful to them is: understanding what similar businesses have achieved; and guidance with a roadmap of small, incremental steps to achieve their goals.

To underpin this roadmap, we recommend prototyping using a flexible reporting tool. This will help you understand the changes that will be required to accounting policy, close process, chart design and sub-ledger posting rules to achieve the required data quality. If this is something you are currently exploring and would appreciate help with, please reach out.

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