What process(es) do you recommend for collecting F/X (Foreign Exchange) cash flow forecasts internal to one's own company? (Webinar Attendee Question)

Hi Kurt,

I always recommend to use automated process, no spreadsheets. It is quicker and reduce the risk of errors.

You can use specific softwares, like FireApps or Reval, connected to your treasury software and TMS. If you do not have any treasury management software, you should buy one.

Regards

I am unclear if you are asking about the collection of actual currency flows for the settling of hedge contracts or if you are asking about the anticipated transactions that would qualify for special “cash flow hedge accounting” under ASC815. For cash flows the process would be very similar to the cash planning and forecasting that is prepared for USD. Information is available through ERP reporting (where available) or can be collected by software or spreadsheet processes. Should the estimated timing of cash flows be incorrect, the banking community offers a currency swap transaction that allows you to roll the contract forward or back to meet the actual timing of the transactions. I am not a big fan, but the banks also offer window forwards which give you flexibility offering a period rather than a date of exchange.

For capturing the anticipated transactions I recommend working closely with the FP&A organization. Unfortunately, they frequently ask for and process their forecast information in USD, totally losing sight of the underlying currency. If this is the case you need to educate them on how their forecast accuracy can be improved by asking the global organization to forecast in the currency the transactions will be based in. Then FPA must use updated rates to consolidate that information. This gives the FPA function the ability to quickly and easily respond to management inquiries on how does a 10 cent drop in the EUR impact the rest of this quarter, and the rest of the year--an impact that could be moderated by having a hedge program in place. It is crucial that the FP&A group know the rates and values protected by a hedge program to accurately project earnings