Liquidity Planning
Liquidity Planning
The category-based liquidity forecast helps identify funding requirements and liquidity surpluses at an early stage, analyse their causes and take appropriate action in good time. The earlier a potential funding gap is identified, the more time there is to negotiate the terms of bridge financing with prospective lenders and select the most suitable offer. In some cases, it may even be possible to finance the gap internally using available funds that would otherwise generate only limited returns when deposited with financial institutions.
Of course, a forecast is only reliable if all required information is available on time, accurately and in full. While this may sound self-evident, it is rarely the case in practice. Thanks to the full integration of the Trinity TMS modules, cash flows from financial transactions recorded in Trinity TMS, such as interest rate and foreign exchange transactions as well as guarantee fees, are automatically included in the forecast without the need for duplicate data entry.
Additional data from a wide range of sources worldwide can also be imported automatically. If a direct one-to-one import is not appropriate, the Shift function allows amounts to be assigned to different categories, distributed across specific time periods or otherwise adjusted based on individually defined rules.
„Together, we have created a powerful, flexible and scalable solution for integrated liquidity planning and management.“
Mark Szameitat, VP Corporate Treasury Head of Capital Markets & Financing, Schaeffler Gruppe
Topics
Planning Structures
All plans can be individually structured, saved and edited for different purposes. Drill-down functions provide insight into the source of the data, while pivot analyses enable flexible, multidimensional evaluations and views.
Variance Analysis
Actual data classification assigns transaction information from electronic bank statements to the relevant planning categories. This allows plans previously populated with planning data to be updated with actual data and compared with the target plans saved earlier. By analysing variances, planning quality can be continuously improved, enabling more accurate liquidity management. Depending on the industry, risk buffers required to compensate for planning inaccuracies can be reduced significantly.
Simulations and Scenarios
Where unexpected developments are a regular occurrence, it is advisable to simulate different scenarios in advance. Trinity TMS allows users to create and save any number of planning variants in order to simulate and analyse the impact of different influencing factors on the company’s future liquidity position.
Liquidity planning in Trinity TMS also helps optimise foreign exchange exposure management and align it with the hedging ratios defined in corporate policies. All cash flows and balances in the currency-specific planning process can be converted into the group currency using market, planning or budget exchange rates.
Planning Data Import
Taking costs and benefits into account, as well as manipulation risks and the need for flexible adjustments, we initially recommend cost-effective and practical solutions to our clients. Data can be transferred just as securely via file-based CSV interfaces as through APIs, while the associated costs are generally lower.
Automated processes can be set up for both methods of data transfer. Where beneficial or required by compliance policies, more complex connections can also be implemented. In many cases, however, these offer little additional value while resulting in higher implementation and operating costs, as experts are required for every adjustment.
For data transfers with a relatively low security risk, we therefore often recommend straightforward CSV-based interfaces via SFTP. Trinity provides the required file specifications, enabling multiple planning data sources to deliver the relevant data quickly, consistently and automatically.
As soon as the source system provides a file, Trinity TMS imports it and performs a range of quality and plausibility checks.
AI/Predictive Analytics
To optimise processes within predictive analytics, Trinity TMS provides a dedicated SHIFT interface for importing planning data. This enables raw planning data to be adjusted by amount and/or timing according to predefined rules before it is imported into Trinity TMS.
For example, if experience shows that, of EUR 5 million in invoices, EUR 3 million will be paid after 30 days, EUR 1 million after 40 days, EUR 0.8 million after 90 days and EUR 0.2 million will not be paid at all, these expected payment patterns can be reflected automatically.
Manual data entry cannot always be avoided, particularly in global operations. Trinity TMS therefore provides allocation functions, growth functions and numerous additional features to help optimise these processes. Wherever possible, however, the import of planning data should be automated in order to accelerate processes and prevent data transfer errors.
Forecast Optimisation with Artificial Intelligence
For liquidity planning, Trinity uses “state-of-the-art” forecasting models based on both statistical modelling and machine learning. These models enable data-driven forecasts differentiated by cash flow, balance, entity and currency.
In addition to generating forecasts, the system also quantifies forecast uncertainty, providing a reliable basis for decision-making. An evaluation algorithm ensures that the most suitable models are always selected for the respective datasets.
Trinity TMS Functions at a Glance
- Individual planning categories and planning structures tailored to the company
- Rolling forecasts
- Freely selectable planning horizons
- Central and local planning
- Geographical, divisional and project-based breakdowns
- Currency-specific planning, with data recorded in original currencies and automatically converted into the group currency
- Exposure management based on market data
- Monitoring of hedge ratio requirements
- Any number of consolidation levels
- Flexible time intervals, from daily to annual
- Consolidation of all cash flows in a single system
- Direct integration of cash flows from recorded financial transactions
- Automated import of planning data from any source
- Filtering options for individual analyses
- Consideration of credit lines, trapped cash and minimum balance requirements
- Simulation options for scenario analysis
- Variance analyses, including plan-to-plan and target-to-actual comparisons
- Export to Excel
„From the perspective of a subsidiary, liquidity planning with Trinity TMS also offers significant advantages, as you always know where you stand and which tasks need to be completed.
Time-consuming routine activities have been reduced to a minimum through automated processes.“
Anika Keun, Controllerin, VESCON Energy GmbH
Benefits
Maximum Transparency and Risk Reduction
- Maximum confidence in decision-making, with all relevant and up-to-date information available in one system
- Early identification of liquidity surpluses and shortfalls, allowing sufficient time to take action and safeguard the company’s liquidity
- Simulations and scenarios that help assess the impact of volatile influencing factors
„The clearly structured and continuously updated overview of the group’s global foreign exchange exposure allows both our management team and me to sleep better than before.“
Holger Schulz, Head of Treasury, TMD Friction Holdings GmbH
Time and Cost Savings
- Automated processes continuously support the creation of a reliable basis for decision-making
- Optimised returns: internal financing potential can be identified before discussions with lenders, while bridge financing and temporary liquidity surpluses can be arranged at the most favourable interest rates
Audit Compliance and Traceability
- Drill-down functions and audit trails ensure that the origin of every cash flow can be traced at any time
Best Practice/Blogs
As planning and safeguarding liquidity is one of the most important responsibilities of a company’s finance department, Trinity has published a number of best-practice articles on this topic.
