Photo of José Luis Martí, Microsoft.

To efficiently manage Microsoft’s global cash, the monthly cash flows of 320+ subsidiaries in 115 countries have to be determined therefore Microsoft has developed a cloud based solution that allows users to submit forecasts to a central web interface with some impressive benefits.

How accurate is your cash forecasting?

The challenge

Accurate and timely cash flow forecasting is an essential element of the cash management process. The level of complexity rises with the number of operational entities, currencies and countries in scope. Funding needs to be streamlined to allow for sufficient liquidity while at the same time ensuring minimal average daily balances in subsidiary managed bank accounts.

The solution

To respond to this challenge, as Edda Kuhlmann, Treasury Manager explains, “a monthly cash flow forecasting process was implemented that requests all of Microsoft’s entities to submit a three-month forecast into a web-based application.

Each subsidiary breaks down its monthly receipts and disbursements into several, standardised sub-categories and determines their funding needs for the upcoming months. The data is collected into a cloud-based database and is available to Microsoft treasury teams centralised in Redmond, WA.” A connection to the existing ERP system allows for daily tracking of forecasted funding needs to actual disbursements. Any variation between the forecasted and actual data is quickly determined, allowing the FX team to act as needed.

The forecast is provided by 80+ users in eight delivery centres globally, based on input from the local sales, HR and tax teams. The forecasting tool used recently migrated from an Excel-based system with macros to a web app that is hosted in the cloud. The new tool is more robust and allows for dozens of users at the same time on multiple platforms.

Best practice and innovation

The cash forecasting tool is connected to Microsoft’s ERP system, allowing easy visibility into bank transactions and closing balances for 95% of Microsoft’s global accounts. A tagging module within the cash forecasting tool allows automated comparison of certain forecasted sub-categories, such as customer collections or disbursements, to actual bank transactions. For many countries accounts payables are centralised and paid on behalf of (POBO) the subsidiary.

Wherever possible, subsidiary accounts are set up as zero balance accounts (ZBA). Both POBO and ZBA originate from and concentrate into Microsoft owned concentration accounts. Several teams utilise Microsoft’s Power BI, a business analytics tool, to track actual disbursements against forecasted amounts for all forecasted currencies. Available bank balances are displayed within the same dashboard. The ability to compare forecasted numbers to actual transactions and actual available balances with the click of a mouse button allows for proper cash balances at all times.

Close cooperation between Microsoft’s global cash management team and the delivery centres guarantees immediate addressing of root causes in case of forecast to actual variances.

Kuhlmann explains, “Cash forecasting is an integral part of our working capital management strategy, yet many companies still rely on forecasts provided by subsidiaries in text form or separate spreadsheets. This cash forecasting process standardises the forecast data and process. Leveraging Power BI analytics, treasury and forecasting users are able to see real-time variances and can act quickly if needed.”