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Empowering cash managers to achieve cost savings by improving predictive accuracy

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  • Salas-Molina, Francisco
  • Martin, Francisco J.
  • Rodríguez-Aguilar, Juan A.
  • Serrà, Joan
  • Arcos, Josep Ll.

Abstract

Cash management is concerned with optimizing a company’s short-term funding requirements. To this end, various different optimization strategies have been proposed for minimizing costs, using daily cash flow forecasts as the main input to the models. However, the effect of the accuracy of such forecasts on cash management policies has not been studied. This article uses two real data sets from the textile industry to show that the predictive accuracy is highly correlated with cost savings when daily forecasts are used in cash management models. A new method is proposed to help cash managers estimate whether their efforts in improving the predictive accuracy are rewarded by proportional cost savings. Our results indicate the need for an analysis of the potential cost savings derived from improving the predictive accuracy. On that basis, the search for better forecasting models is in place in order to improve cash management.

Suggested Citation

  • Salas-Molina, Francisco & Martin, Francisco J. & Rodríguez-Aguilar, Juan A. & Serrà, Joan & Arcos, Josep Ll., 2017. "Empowering cash managers to achieve cost savings by improving predictive accuracy," International Journal of Forecasting, Elsevier, vol. 33(2), pages 403-415.
    • Handle: RePEc:eee:intfor:v:33:y:2017:i:2:p:403-415
    DOI: 10.1016/j.ijforecast.2016.11.002
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    Cited by:

    1. Francisco Salas-Molina, 2024. "Fitting random cash management models to data," Papers 2401.08548, arXiv.org.
    2. Francisco Salas-Molina & Juan A. Rodriguez-Aguilar & David Pla-Santamaria, 2020. "A stochastic goal programming model to derive stable cash management policies," Journal of Global Optimization, Springer, vol. 76(2), pages 333-346, February.
    3. Francisco Salas-Molina, 2020. "Risk-sensitive control of cash management systems," Operational Research, Springer, vol. 20(2), pages 1159-1176, June.
    4. Francisco Salas-Molina & Juan A. Rodríguez-Aguilar & Montserrat Guillen, 2023. "A multidimensional review of the cash management problem," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 9(1), pages 1-35, December.
    5. Schroeder, Pascal & Kacem, Imed, 2020. "Competitive difference analysis of the cash management problem with uncertain demands," European Journal of Operational Research, Elsevier, vol. 283(3), pages 1183-1192.
    6. Francisco Salas-Molina & Juan A. Rodr'iguez-Aguilar & Pablo D'iaz-Garc'ia, 2017. "PyCaMa: Python for cash management," Papers 1702.05005, arXiv.org, revised Feb 2017.
    7. Francisco Salas-Molina & Juan A. Rodríguez-Aguilar, 2018. "Data-driven multiobjective decision-making in cash management," EURO Journal on Decision Processes, Springer;EURO - The Association of European Operational Research Societies, vol. 6(1), pages 77-91, June.

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