Project cash forecasting is designed to address the budgeting, forecasting, and cash flow analysis needs of long-term, high-value projects. Its primary purpose is to provide a comprehensive financial overview by recognizing funding requirements based on forecasted cash inflows and outflows. This feature helps predict when and how much money will be received and spent, ensuring optimal cash flow management to avoid shortages and maximize liquidity.
Project cash forecasting focuses on predicting cash flow rather than costs and revenues. It accounts for the time delay caused by payment terms from the cost and revenue dates, which influences the cash flow timing. Project cash forecasting is integrated with financial cash planning, allowing for the consolidation of sales and sub contract, supply chain, and finance sources into a comprehensive project cash forecast.
Key benefits of the Project Cash Forecast include:
The project forecast spread and the project cash forecast spread rarely represent the same point in time. A cost is recognized in the project forecast when it is incurred, but the related cash outflow normally happens later, once the supplier invoice is paid. Revenue works the same way: it is recognized in the project forecast when earned, but the cash inflow follows once the customer pays. Cash Spread Offset Periods models this timing difference automatically, without changing the cost or revenue forecast itself.
For example, the supplier invoice date normally drives the cost spreading, whereas the payment date drives the cash spreading. The difference between these two dates is determined by the payment terms agreed with the supplier.
The offset is defined per cost/revenue element for the company. It sets how many periods later the cash spread amount is placed compared to the corresponding project forecast spread period, when spread amounts are copied from a project forecast to a project cash forecast. A cost/revenue element with no offset value copies the spread to the same period in both forecasts.
Typical reasons to use an offset:
This company-level default can be overridden for a specific project with different payment terms, using Cash Spread Offset Periods Override in the PCE Code Part tab of the Project Setup Parameters page, without changing the default used by other projects. Setting the offset once at company level, and overriding it only where a project's payment terms differ, avoids adjusting the cash spread manually on every project.
A company's suppliers are normally paid 30 days after the invoice date, one period after the cost is forecast. The cost/revenue element Materials is set up with a Cash Spread Offset Periods value of 1, so cost spreads forecast for March are copied to April in the project cash forecast. A specific project with 60-day supplier terms overrides this to 2 periods in Project Setup Parameters, without affecting the company default used by other projects.
The Project Cash Forecast page is a dedicated page for creating and analyzing project cash flows. It features separate tabs for cash outflows and inflows, allowing effective management and review of financial data. All the information is in one place – Planned Amount, Actual Amount, and Remaining Amount. This helps speed up the analysis and decision-making processes.
Business Reporter reports can used for flexible reporting and analysis. Information sources exist for Project Cash Forecast Item and Project Cash Forecast Item Period, the latter showing the period spread values for a forecast line. Write-back is enabled for the total amount and for the period spread values, increasing the user’s workflow efficiency and flexibility.
Distributing forecast cash amounts into specific time periods helps in planning when cash flows are most likely to occur, ensuring accurate financial forecasting. Profile-based spread profiles let you define specific cash flow profiles tailored to different project types, phases, costs, and revenue elements. This enables a more granular and realistic projection of future cash inflows and outflows, ensuring accuracy, usability, and flexibility.
When creating a Project Cash Forecast by copying from a Project Forecast, you can optionally copy the project forecast spread details to the cash forecast. The payment offset period is taken into account when copying the spread from a project forecast to a cash forecast. Automating the cash-spreading process significantly reduces the time and effort required for manual data entry and adjustments, allowing you to focus on more strategic tasks.
One of the main differences between the project forecast spread (cost and revenue spread) and cash forecast spread is the timing. For example, the supplier invoice date normally drives the cost spreading, whereas the payment date drives the cash spreading. The difference between these two dates is determined by the payment terms agreed with the supplier. You can create and apply specific cash flow profiles tailored to various project types, phases, costs, and revenue elements, providing greater flexibility in managing diverse projects.
By connecting a cash plan snapshot to a project cash forecast, it is possible to integrate cash flow from all connected sources. The cash plan snapshot holds information about objects used for cash planning, such as sub-contracts, purchase orders, and invoices. Snapshot details include cash amount, currency, date, project, sub-project, activity, and cost/revenue element information.
The cash plan snapshot consists of planned and actual values. The planned values include transactions from the cash plan snapshot where the cash transaction has not yet occurred, for example, sub-contracts, purchase orders, and invoices. The actuals include payments and the general ledger transactions that have been configured to be included in cash planning.
This allows project Financial Controllers to review actual cash payments and receipts against planned items, helping to determine the remaining budget. The remaining amount is calculated by deducting the planned and actual amount from the cash plan from the total amount, which then needs to be spread and sent back to the cash plan.
Additionally, it is possible to drill down to the actual transaction details via the connected cash plan snapshot.
The New Project Cash Forecast assistant simplifies the process of setting up a new cash forecast by guiding through the necessary steps. There are several flexible options for creating a new cash forecast. It is possible to create a forecast header and manually enter forecast items, providing complete control over the details. Alternatively, you can copy forecast lines and period spread values from an existing cash forecast, which saves time and ensures consistency with previous forecasts. Another option is to copy forecast lines from a project forecast, with the ability to transfer EAC values to the Total Amount column. It is also possible to decide whether to include period spread details and account for payment offset periods when copying from a project forecast. It is also possible to decide whether to include period spread details and account for cash spread offset periods (see Cash Spread Offset Periods below) when copying from a project forecast.
Multi-currency cash forecasting is supported. Enable the Cash Forecasting in Multi-Currency option in the Project Setup Parameters page to forecast in the transaction currency.
Forecast types can be used to group project cash forecasts that have been created for similar purposes. Each forecast type will be assigned a unique forecast version series.