Automated cash flow forecasting for efficient treasury operations


Client’s treasury function makes 12 month rolling predictions for hundreds of cash flow time series on a monthly basis. The predictions are done manually thus leading to about 350+ man hours of effort on a monthly basis as well as the accuracy of the predictions are lower than desired. Hence, the client’s treasury function wanted to implement a solution to generate these forecasts automatically with a high degree of accuracy.

Automated cash flow forecasting for efficient treasury operations


Business Understanding

We collaborated with the treasury team to understand the business forecasting process in detail and draw up a holistic list of parameters which impact cash flows and hence the predictions.

Feature Engineering

Features were generated for the following class of factors:

  • Historical cash flow pattern for each cost center in the organization
  • Volume, value, and timing of sales and purchase invoices
  • Macro-economic factors like GDP, GDP Growth, Wage Growth, Inflation etc.
  • Treasury business process related factors like mechanism and timing of tax payments, reconciliation etc.

Model Development

To predict the cash flow of cost center, two models were applied in sequence:

  • Outlier Detection Model: A robust outlier detection model was implemented to detect unexplained / erratic cash flow patterns related to acquisitions, change in payment mechanisms, human error etc.
  • Cash Flow Prediction Model: Multi-variate regression-based model to predict the future cash flows based on the features identified above


Model developed achieved the following:

  • Project was awarded the “Excellence in Treasury” award from the European Association of Corporate Treasurers
  • Enhanced forecasting accuracy by ~20-30% over the existing manual forecasting process
  • Achieved 80% reduction in man hour requirement of 350 hours on a monthly basis

Case Studies