Insight & Analysis

Cash forecasting delivers for direct mailing supplies and services specialist

Published: May 2022

The treasurer of leading North American manufacturer of envelopes and custom labels, Cenveo, says cash forecasting has played a key role in managing supply chain risk over the last two years.

Colourful envelopes laid out neatly

Cenveo is a world leader in the management and distribution of print and related offerings. Headquartered in Stamford, Connecticut, it operates 20 facilities across the US, employing more than 2,900 people servicing some of the world’s most recognisable brands.

The company is a major player in the global direct mail advertising market, which is worth more than US$71bn globally. However, it faced major challenges following the outbreak of coronavirus.

“We received four or five price increases during 2021 which required us to quickly adapt our cash forecasting and liquidity models,” explains Benjamin Seal, Vice President of Treasury.

The company has continued to model different scenarios – such as future unexpected price increases – which allow it to better manage liquidity by optimising working capital to improve days sales outstanding, days payable outstanding and days inventory outstanding.

As vaccination programmes have rolled out and restrictions have been lifted there is a sense that supply chain risk has become easier to predict. However, Seal acknowledges that unknowns (such as the emergence of a new variant) have the potential to delay the return to pre-pandemic conditions.

“We constantly have to plan ahead and have multiple forecasts in place,” he says. “Over the years, treasury generally has taken more of a front seat and then regressed, so we need to put ourselves in front of the management team and continue to drive change and embrace technology.”

Seal and his team are constantly realigning and improving their forecasts for revenue and purchasing. “For any information to be useful it has to be accurate, so if you don’t update your forecasts quickly to reflect those changes you aren’t providing useful information to management,” he says.

One of the key trends in treasury management is the convergence between treasury and financial planning and analysis, where the former is required to provide highly accurate models over a longer timeframe than might have been the case in the past.

Seal observes that even before the outbreak of coronavirus, Cenveo was producing a daily 12-month rolling forecast model and liaising with financial planning and analysis colleagues to ensure their reports are as up to date as possible.

“We also work with the sales and purchasing teams, which is necessary for treasury to provide an accurate and impactful liquidity forecast,” he adds.

Seal is enthusiastic about the potential of supply chain finance to reduce overheads, having compared it to the cost of purchasing cards where vendors can face charges ranging from 2.5% to 3% of the transaction amount.

He estimates that a vendor looking for supply chain finance of US$100,000 over 30 days would incur costs of about US$650 – which for US$1m equates to a saving of approximately US$18,000.

“As treasury we have to define that win-win scenario to optimise idle cash,” says Seal. “That is where dynamic discounting and supply chain financing is ideal because with the latter you could possibly extend out your days payable outstanding but let your vendors tap into financing at a lower rate.”

This strengthens the supply chain by making it easier for smaller companies in particular – who are vital suppliers for many large corporates – to access funds to improve their liquidity.

“We are excited to put some idle cash flow to use with dynamic discounting and we want to strengthen that relationship with vendors and let them know we are here to provide additional payment options,” adds Seal.

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