Showing papers on "Cash flow forecasting published in 2020"

Using Behavioral Analytics to Predict Customer Invoice Payment.

Abstract: Experiences from various industries show that companies may have problems collecting customer invoice payments. Studies report that almost half of the small- and medium-sized enterprise and business-to-business invoices in the United States and United Kingdom are paid late. In this study, our aim is to understand customer behavior regarding invoice payments, and propose an analytical approach to learning and predicting payment behavior. Our logic can then be embedded into a decision support system where decision makers can make predictions regarding future payments, and take actions as necessary toward the collection of potentially unpaid debt, or adjust their financial plans based on the expected invoice-to-cash amount. In our analysis, we utilize a large data set with more than 1.6 million customers and their invoice and payment history, as well as various actions (e.g., e-mail, short message service, phone call) performed by the invoice-issuing company toward customers to encourage payment. We use supervised and unsupervised learning techniques to help predict whether a customer will pay the invoice or outstanding balance by the next due date based on the actions generated by the company and the customer's response. We propose a novel behavioral scoring model used as an input variable to our predictive models. Among the three machine learning approaches tested, we report the results of logistic regression that provides up to 97% accuracy with or without preclustering of customers. Such a model has a high potential to help decision makers in generating actions that contribute to the financial stability of the company in terms of cash flow management and avoiding unnecessary corporate lines of credit.

The Effect of Cash Injections: Evidence from the 1980s Farm Debt Crisis

Abstract: What is the effect of cash injections during financial crises? Exploiting county-level variation arising from random weather shocks during the 1980s Farm Debt Crisis, we analyze and measure the effect of local cash flow shocks on the real and financial sector We show that such cash flow shocks have significant impact on a host of economic outcomes, including land values, loan delinquency rates, the probability of bank failure, employment, and wages Estimates of the effect of local cash flow shocks on county income levels during the financial crisis yield a multiplier of 163

Artificial Intelligence and Machine Learning in Treasury Management: A Systematic Literature Review

Abstract: Treasury management is becoming more complex with the advancement in the business. The enterprise needs better treasury management for its progress. One of the major functions of the treasury is cash management that requires cash forecasting. This creates the need for artificial intelligence and machine learning because these can help the enterprise in predicting the cash flow. Centralized treasury management can be helpful for providing accurate data to the machine learning model for learning purposes. This paper proves the importance of artificial intelligence and machine learning for treasury management. Different machine learning prediction models are discussed that can be helpful to the enterprise in predicting the cash flow.

Symbiotic organisms search-optimized deep learning technique for mapping construction cash flow considering complexity of project

Abstract: Accurate construction cash flow forecasting is very important in successfully managing cost during execution of building projects. Despite many research efforts, it still remains a difficult issue in attaining an accurate forecast model of cash flows due to the risk factors and characteristic of the project. Additionally, cash flow of the construction projects is strongly impacted by sequence and non-sequence factors. Hence, this study proposed a novel artificial intelligence(AI)-based inference model, named symbiotic organisms search-optimized neural network-long short-term memory (SOS-NN-LSTM), which employs symbiotic organisms search (SOS) algorithm to obtain the suitable hyperparameters of the neural network (NN) and long short-term memory (LSTM) for establishing a robust hybridization model. In the proposed model, the LSTM technique addresses time series problem with considering the complexity of projects while the NN technique aims at tackling non-sequence factors. The experimental results on 13 construction projects have supported the SOS-NN-LSTM as the best model in forecasting the cash flow by achieving the greatest values of (2.55%), MAPE (5.71%), MAE (2.07%), and R2 (0.983). The statistical result further reveals that accuracy of cash flow forecasting can be improved at least 13.4% and 12.0% in terms of RMSE and MAE, respectively, in comparison with other comparative AI-based inference models. The SOS-NN-LSTM model is thus a useful tool to help managers forecast and control cash flow of construction projects.

Cash flows and financial performance in the industrial sector of Saudi Arabia: With special reference to Insurance and Manufacturing Sectors

Abstract: A firm with proper cash flow management can increase its financial performance, while improper management might lead to financial failure. Therefore, it is significant for a firm to manage cash inflows and outflows properly. The current study investigates the effect of cash flow from operations (CFOs) on the financial performance of insurance and manufacturing companies in Saudi Arabia. The data were extracted from companies’ annual reports by considering Return on Assets (ROA) and Return on Equity (ROE) as dependent variables, CFOs as an explanatory variable, firm size (SIZE) and Leverage (LEV) as control variables, and an industry dummy. The results report a positive and significant association between financial performance (ROA and ROE) and operating cash flows (CFOs), and a negative association for SIZE and LEV. Therefore, the study concludes that the firms’ operating cash flows in the insurance and manufacturing sectors in Saudi Arabia affect financial performance.

Evaluation of Financial Ability of Port Listed Companies Based on Entropy Weight TOPSIS Model

Abstract: Guo, Z., 2020. Evaluation of financial ability of port listed companies based on entropy weight TOPSIS model. In: Yang, Y.; Mi, C.; Zhao, L., and Lam, S. (eds.), Global Topics and New Trends in Coastal Research: Port, Coastal and Ocean Engineering. Journal of Coastal Research, Special Issue No. 103, pp. 182–185. Coconut Creek (Florida), ISSN 0749-0208.In order to evaluate and compare the financial capacity of port listed companies in China scientifically, the entropy value and weight of the evaluation indexes are determined by using the TOPSIS Model of entropy weight. The 2018 data is selected to conduct an empirical study on the financial capacity of 19 port superior companies. The results show that: affected by regional economic level and other factors, the overall level of debt paying ability of port listed companies is good, the profitability gap is large, the overall level of operation ability is poor, the development ability is unbalanced, and the cash flow management needs to be strengthened urgently. The financial ability evaluation model of port listed companies constructed by the research institute is more accurate and credible, which can provide important reference for stakeholders to evaluate enterprises and carry out decision-making.

An assessment of risks associated with contractor’s cash flow projections in South-South, Nigeria

Abstract: Construction contracts have been widely acknowledged to be capital intensive, complicated, and risk prone. The purpose of the study is to assess risk factors affecting contractors’ cash flow for co...

Controlling in cash flow management of the company

Abstract: In today’s business environment, cash flows are one of the main resources that provide conditions for sustainable business development, maintaining the company’s solvency, and protecting against the risk of bankruptcy. The success of the production, investment, and financial activities depends on the effective use of funds, therefore, the issues of improving internal cash flow controlling become especially relevant in the context of the aggravation of the external financial and economic situation in the country, the increase in the cost of financial resources, and the restrictions of requirements imposed by investors and creditors. The article presents current trends in improving the organization’s cash flow controlling system. It offers methodological approaches to the organization of cash flow monitoring and justification of the system of analytical indicators for evaluating the effectiveness of cash asset management. It justifies the sequence of implementation of the mechanism for rationing the need for funds to ensure the permanent solvency of the organization.

The impact of cash flow management versus accruals management on credit rating performance and usage

Abstract: Corporate bond issuers attempt to influence bond ratings through their discretion over reported numbers, which could diminish credit rating quality. I find that cash flow management is negatively associated with rating quality, while accruals management is not. These results suggest that rating agencies fail to adjust for cash flow management, but they undo accruals management. The differential results for cash flow management versus accruals management could be due to the rating agencies’ more skeptical attitude towards accruals and the lower cost of adjusting accruals management. The relation between cash flow management and rating quality is weaker for issuers with high leverage and issuers with prior ratings around the investment-/speculative-grade cutoff. Overall, the evidence suggests that rating management through managerial discretion over reported numbers has a detrimental impact on rating quality, but only via the cash flow component. Fortunately, the bond market understands the implications of cash flow management on rating quality and relies less on ratings in response to cash flow management.

Probabilistic life cycle cash flow forecasting with price uncertainty following a geometric Brownian motion

Abstract: In the Netherlands, probabilistic life cycle cash flow forecasting for infrastructures has gained attention in the past decennium. Frequencies, volume and unit prices of life cycle activities are treated as uncertainty variables for which an expert-based triangular distribution is assumed. The current research observes the absence of time-variant variables typical for infrastructure life cycles among which price (de-)escalation. Moreover, previous research has shown that price (de-)escalation and its uncertainty should not be ignored as it may lead to over or underestimation of costs, especially for public sector organisations which use low discount rates. For that reason, the current research has searched for a more data-driven approach to include price (de-)escalation and its uncertainty by adopting a price forecasting method from the financial domain, a Geometric Brownian Motion. The uncertainty variables drift and volatility are obtained from publicly available price indices. This approach is easily included in the current practice for probabilistic cost forecasting which is demonstrated on a case study. The case study shows that ignoring price increases may lead to an underestimation of total discounted costs of 13%. From an academic perspective, the current research advocates inclusion of price uncertainty in multi-objective optimisation modelling of infrastructure life cycle activities.

Cash flow management by risk-neutral and risk-averse stochastic approaches

Abstract: This article presents a dynamic cash flow management problem with uncertain parameters in a finite planning horizon via two-stage stochastic programming (SP). We propose a risk-neutral mixed-intege...

Do analysts’ cash flow forecasts improve firm value?

Abstract: We examine whether analysts’ cash flow forecasts improve firm value. First, we analyze whether the joint issuance of financial analysts’ earnings and cash flow forecasts improve firm value. Second, we analyze whether the quality of analysts’ cash flow forecasts improve firm value. The empirical results of our study are as follows. First, the joint issuance of analysts’ earnings and cash flow forecasts has a significantly positive effect on firm value; providing cash flow forecasts reduces information asymmetry and increases earnings quality, thereby increasing corporate value. Second, the quality of analysts’ cash flow forecasts has a significantly positive effect on firm value; the more accurate cash flow forecasts are, the higher firm value is. Our study provides empirical evidence for that the conclusion that cash flow forecasting information produced by financial analysts provides useful information for capital market participants in economic decision making.

Analysis of the Investment Program of the Analytical Cycle at the Enterprise for the Development of the Company's Entrepreneurial Activity

Abstract: Aim of the Study: Planning and control of cash flows form the basis of the entire cash flow management mechanism of the enterprise. On the one hand, cash flow planning is the process of developing a system of plans and planned indicators for the formation of various types of these flows for the operating, investment and financial activities of the enterprise in the next period. Methodology: On the other hand, cash flow planning is a set of measures and tools for forecasting and managing the cash flow. it consists of two parts: expected receipts and expected disbursements of funds. As you can see, cash flow planning can be considered as the process of developing cash flow plans for various types of activities using specific tools and tools. The main purpose of cash flow planning is to optimize cash flows, determine the adequacy of funds, and identify the causes of the deficit or surplus. Cash flow planning includes the formation of a system of planned financial indicators, on the basis of which cash flow plans are drawn up, and deviations from the specified parameters are controlled (evaluated, identified and corrected). It is advisable to form the appropriate parameters taking into account the nature and specifics of cash flows. Cash flow planning is implemented within the framework of the General system of long-term and current financial planning of the enterprise, based on the strategic goals and mission of the enterprise, within which a system of specified plans (budgets) is developed, providing for the processes of approval, approval, adjustment and monitoring of implementation. Conclusion: The development of planned budgets at the enterprise is characterized by the term "budgeting" and is aimed at solving two main tasks: determining the volume and composition of cash expenditures related to the activities of individual structural units and divisions of the enterprise; providing these expenditures with financial resources from various sources. In order to create an effective system for budgeting cash flows, we suggest the following algorithm for its construction.

Cash flow forecasting for international projects in the process of capital budgeting during the covid-19

Abstract: By predicting cash flows in the capital budgeting procedure, the profitability of an investment at the international level is determined in advance. Although investing globally provides greater opportunities for earnings, cost reduction and business diversification, all risks posed by international business must be considered when choosing a discount rate. In addition to the risks inherent in cross-border business such as exchange rate risk, country risk, the risks caused by the pandemic crisis, which relate primarily to measures taken by states to protect the population by introducing quarantine, restricting the flow of people, goods and capital, as well as activities that are endangered by a pandemic, must be considered too. If all the risks that determine the discount rate are well assessed, the cash flow forecast will be more accurate.

Does Human Resource Investment for Internal Control System Enhance Future Cash Flow Predictability

Abstract: Generating positive long-term cash flow is vital for a firm’s sustainability. In this paper, we consider the earnings in the forecasting of future cash flow from a human resource investment of an internal control system. Using the firms listed in the Korea Stock Exchange market from 2014 to 2018, we find that the current earnings are the components of cash flow forecasting, and this relationship is genuine in a firm equipped with sufficient internal control personnel and their experiences. These findings indicate that earnings are reliable when forecasting future cash flow for a firm with a well-operated foundation.

Cash Flow in an Agribusiness Restructuring Process

Abstract: The purpose of this article is to present cash flow as an accessible and efficient tool for the management of small and medium-sized egg companies, including those close to bankruptcy, aiming at their financial recovery. In order to achieve results, action research and the cash flow management method were adopted. The data were collected from a Brazilian egg producer that was close to bankruptcy. Data collection, implementation of the management tool and performance monitoring took place between July 2016 and December 2017. The use of the cash flow tool allowed the company’s financial recovery, which led to an increase of 951.5% in its cash and cash equivalents at the end of the research period, generating 22.5% of cash on the operating result and maintaining its minimum balance of cash by 23.6% above the limit required for it to keep operating safely. The method considered only the Cash Flow Statement, as it is the most practical and easy to understand for managers who have no management experience or training. The Balance Sheet and Income Statement were not explored. From the research results it is expected that the proposed management tool would be adopted by other small and medium-sized egg producers in Brazil, as well as in other branches of agribusiness. Hitherto, we are not aware of the availability of a tool proposed for small and medium companies in the animal production segment in Brazil. Therefore, it could be a valuable contribution to the socioeconomic development of this sector.

Improving Financial Performance Using Capital Budgeting Method Towards Cleaner Eyewear Product: A Case Study of Nasho

Abstract: The purpose of this study was to know the factor that can be improved in the financial performance of Nasho. Nasho is a brand that focuses on offering products for eyeglass and helmet application that can be water, dew and dust repellent by utilizing the application of nanotechnology in the scope market of Bandung. However, to adapt the technology for Nasho is currently hampered by the limited capital to develop the technology itself. The company needs to manage the capital and minimize the cost to optimize the finance. The company needs to control the cost and expenses to avoid the high number of costs and expenses in terms of the development business stage. The research will use a qualitative approach by conducting interviews to Mr. Reza optics that will cooperate with Nasho to sell the product and use secondary data information from literature review, journal, books and primary data from financial history of Nasho and survey from the consumer of Nasho namely College student, Medical staff and Motorcycle riders and the components that are relevant to the conceptual framework. Survey used to get the consumer product and buying tendency information from Nasho’s consumer to validate the assumption of brand, price and buying intencity. Interview was conducted to get the suitable number of sales that are being used for cash flow forecasting scenario. The findings of this research is Nasho had low financial performance in the first two years of the business. After the evaluation, this can be improved by making a financial planning mix for short term and long term using the capital budgeting method in the form of three optimal scenarios of cash flow, Net Present Value (NPV), IRR and payback period that can be used as an optimal plan to run this business for the next five years.

Fuzzy Uncertainty Modelling in Cost and Cash Flow Forecasting in Project

Abstract: Numerous projects (e.g. more than 50% of IT projects) are not finished within budget and cause serious financial problems to the organisations implementing them. It is thus important to be able to predict the cost of projects and cash flows related to them early enough, in order to be able to assess with the necessary anticipation whether the necessary financial means will be available on time and if not, to take in time the necessary measures to solve the menacing problem. In the paper the sources of uncertainty with respect to project cost and cash flows will be identified and their modelling by means of fuzzy sets will be proposed. Such issues neglected in the project management literature as various taxes, duties and impositions, which belong to the area in which project managers are not experts and where they do not follow the detailed regulations, will be discussed too. They are of high importance, because legal changes in this area come often as a surprise for project managers and lead to serious liquidity problems. The approach will be illustrated with a real world case study, in which one of the authors was the member of the project team.

Dealing Operations as a Means of Improving the Efficiency of the Financial Management of a Production Company

Abstract: In modern conditions of business management, the issues of the efficient use of financial resources are of particular importance, ensuring the constant solvency of production enterprises. For this purpose, it becomes necessary to organize specialized functional units-treasuries in the management structure of vertically integrated companies. One of the tasks that such divisions solve is the operational control, the centralized accumulation of temporarily free funds from enterprises, branches, and divisions that are part of the holding. These funds are further used either for instant repayment of urgent obligations or placed in short-term financial assets that generate income. Based on a critical study of classical approaches to the organization of operational cash management at production enterprises, the directions of reorganization of the cash flow management system for increasing the profitability of the financial activities of the company are proposed. The paper shows the key features of financial resources management in a vertically integrated production company using dealing operations. An original method of assessing the effectiveness of cash flow management for attracting and temporary placement of free cash assets is proposed. The authors also focus on the functioning of the financial service in the management structure of a manufacturing company and the algorithm for evaluating the effectiveness of short-term transactions that contribute to generating additional income and minimizing financial risks.

Formation and development of the cash flow management system of the agricultural enterprise in conditions of financial instability

Abstract: This article examines the agricultural enterprise cash flow management system, the modeling of efficiency, and the diagnostics of the operations optimization and risk management system. The purpose of improving the cash flow management system was to provide effective solutions to business problems of Ukrainian agricultural enterprises. The cash flow management system is still in formation. In fact, there is no methodology for estimating the risks associated with cash flow management, and there is a need for scientific justification for optimizing cash flows. It is also necessary to improve the methodological support of the coordination mechanism of cash flows and use of investment and financial-credit resources of the agricultural enterprise. Seasonality of agricultural production, which influences the formation of cash flows of the economy, requires the creation of insurance stocks of funds and their equivalents, profitable their temporary investment in various financial instruments, the choice of the most effective ways of financing economic activity in the absence of own funds. A set of guidelines to increase the success rate of the agricultural enterprise cash flow management system is substantiated. A number of optimization strategies for increasing the profitability of an agricultural enterprise have been studied, and the economic benefits of them have been proposed. These scenarios were based on modeling performance in specific circumstances, increasing the reliability of the study. Finally, a number of risk management strategies aimed at improving the cash flow of an agricultural enterprise are reviewed. It is concluded that the use of advanced technical and economic tools can have a positive impact on how the manager manages the agricultural assets of the agricultural enterprise through the implementation of practically proven optimization and risk management strategy. The results showed that the key factors required for an agricultural enterprise to ensure a successful cash flow management system are: management and people; improving the structure of working capital; stakeholder support; a functioning market; marketing system; business development; the use of innovation and access to technology.

Формирование информации о денежных потоках в целях принятия инвестиционных решений

Abstract: Importance. The article explores the usefulness of cash flow information disclosed in financial and corporate reports and its relevance to the information needs of the investment community. The analytical capabilities of financial reporting for forecasting and financial modeling purposes are limited by the insufficient completeness of disclosures necessary for the development of forecast models. Along with financial reporting indicators, investors, analysts and companies themselves are actively using alternative indicators of cash flows or non-GAAP indicators. The variety of approaches to the determination of non-GAAP indicators reduces the reliability of the investment analysis, on the one hand, and creates conditions for data manipulation, on the other. Objectives. A comprehensive author's study of the forming reliable information about the business ability to create cash flows in the interest of making investment decisions. Methods. In the research process, we used the methods of logical, statistical, comparative, as well as linguistic analysis. As the main objects of comparative analysis, we considered indicators of profit indicators before interest, taxes and depreciation, free cash flow, net debt and their ratios. In order to characterize the significance of these indicators for assessing the investment attractiveness of issuers, we provided the analysis of the metallurgical companies` dividend policy and its connection with considering metrics. Results. The results of the study include recommendations on the cash flow disclosure in order to increase the validity of investment decisions. We focused on those aspects of cash flow disclosures that could significantly affect the investment assessment. Conclusions and Relevance. The study showed that the methodology for the formation of cash flow indicators in the organizations is affected by different factors. In order to provide information for cash flow forecast and modelling, reporting companies should disclose data on strategies, business models, sources of cash flows and directions of their use. Non-GAAP indicators` disclosure should be based on the same principles that apply in preparing financial statements. All material adjustments carried out with the calculation of the non-GAAP indicators should be presented to users.

Ways to improve the company's cash flow management

Abstract: In a market economy, the company's cash flow is the most limited resource, so effective cash management ensures financial stability in the process of enterprise development. The study of cash flow management is aimed at generating information about the direction and sources of cash flow, time parameters, and volumes. This information is necessary to justify decisions about managing cash flows, taking into account the influence of objective and subjective, internal and external factors. Cash flows of an enterprise require the organization of their turnover, use, distribution, and formation. Therefore, the company's cash flow management system, based on the principle of integration, complexity, orientation and variability, is very necessary, since this is one of the important stages of the company's activity, which creates the basis for achieving and developing large final results. Management of the organization's cash flows is carried out within the framework of operational goals aimed at increasing the market value of the enterprise, along with strategic goals that allow you to develop a set of tactical and short-term planning tasks that allow you to determine the optimal level of funds.

How AI Can Help Build Resiliency for Small Businesses in a Global Economic Crisis

Abstract: In the midst of COVID-19, a global economic crisis is threatening the livelihoods of small business owners everywhere. In ordinary times, 50 percent of small businesses go out of business in the first 5 years. In today's extraordinary times, nearly 7.5 million (~25 percent) of small businesses in the U.S. alone have been at risk of closing permanently in a matter of months (Source: Main Street America's Small Business Survey 2020). Among the all-time top contributing factors to survival? Cash flow management and access to capital. Whether in the midst of a pandemic or a devastating life event, business owners are more likely to survive if they can 1) efficiently manage the inflow and outflow of cash, 2) understand their cash position to qualify for government aid and/or loans with flexible borrowing terms, and 3) use financial insights to map out revenue and spending scenarios. In this talk, Nhung Ho, Director of Data Science for Intuit's Small Business and Self-Employed Group, will describe how Intuit AI has applied artificial intelligence and large-scale machine learning to help small businesses around the world to overcome the challenges of cash flow forecasting and capital access to build financial resilience in turbulent times.

Engineering of business processes in accounting support of cash management

Abstract: Purpose. The purpose of the study is to develop the accounting aspect of business process engineering as the main tool in management. Methodology / approach. The research uses methods of scientific abstraction, grouping and systematization to identify the current state and outline the directions of development of accounting engineering. Methods of analysis and synthesis, as well as the coefficient method for the development of the analytical component of cash management are used. Results. Engineering is an effective tool for optimizing business processes of enterprises. It should be considered as a way of implementation into a certain sphere of human activity non-specific (foreign) tools, techniques, methods, etc., aimed at solving problems that cannot be solved by the existing tools specific to this area of activity. Accounting engineering is the process of developing, designing and implementing innovative tools, methods and techniques borrowed from other sciences that are used to improve accounting as a system that provides information to the management system. It is a platform for generating the accounting information needed to make strategic management decisions. The effect of accounting engineering is analyzed on the example of cash management, as current trends are focusing more and more on cash flow as the main object of financial management of the enterprise. A cash management mechanism based on accounting engineering is proposed, which includes the following stages: cash flow planning and forecasting, adherence to the schedule of receipts and payments within budget limits, evaluation of cash management efficiency. Originality / scientific novelty. It is proved that the need for engineering for accounting science and practice is necessitated by the need to form special ways to solve problems that have remained unresolved for accounting for a long time and could not be solved due to limited methodological approaches, methods and techniques. The influence of accounting engineering on the efficiency of the management system on the example of cash management is outlined. Practical value / implications. The application of business process engineering in cash flow management of the enterprise by assessing the value of the integrated indicator of cash flow management has identified a number of cash flow management problems, their causes, consequences (risks) for the company and provide suggestions to minimize identified risks.

Building and Maintaining a Desired Exposure to Private Markets: Commitment Pacing, Cash Flow Modeling, and Beyond

Abstract: Unlike public markets, private market holdings are a class of self-liquidating assets. Consequently, there is no passive strategy, e.g., buy-and-hold, to invest in private markets. All investments require an active management. In order to build and maintain a desired allocation to private markets one needs a commitment pacing plan that balances several objectives including stable exposure, performance, cash flow management, diversification over funds and time, and maintaining relationships with GPs. A good commitment pacing plan is often seen as the lynchpin of a private capital program and can account for much of the dispersion in performance across LPs. We present a simulation-based framework to show the tradeoff between the steady-state NAV and the speed with which it can be built using a simple, yet powerful, commitment strategy and a popular cash flow model. Our framework also reveals the tradeoff between liquidity and risk-adjusted performance assuming the existence of private market premium in US buyout investments.