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Empowering cash managers to achieve cost savings by improving predictive accuracy

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  • Francisco Salas-Molina
  • Francisco J. Martin
  • Juan A. Rodr'iguez-Aguilar
  • Joan Serr`a
  • Josep Ll. Arcos

Abstract

Cash management is concerned with optimizing the short-term funding requirements of a company. To this end, different optimization strategies have been proposed to minimize 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. In this article, using two real data sets from the textile industry, we show that predictive accuracy is highly correlated with cost savings when using daily forecasts in cash management models. A new method is proposed to help cash managers estimate if efforts in improving predictive accuracy are proportionally rewarded by cost savings. Our results imply the need for an analysis of potential cost savings derived from improving predictive accuracy. From that, the search for better forecasting models is in place to improve cash management.

Suggested Citation

  • Francisco Salas-Molina & Francisco J. Martin & Juan A. Rodr'iguez-Aguilar & Joan Serr`a & Josep Ll. Arcos, 2016. "Empowering cash managers to achieve cost savings by improving predictive accuracy," Papers 1605.04219, arXiv.org.
    • Handle: RePEc:arx:papers:1605.04219
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    References listed on IDEAS

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    Cited by:

    1. 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.
    2. 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.
    3. 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.
    4. Francisco Salas-Molina, 2024. "Fitting random cash management models to data," Papers 2401.08548, arXiv.org.
    5. Francisco Salas-Molina, 2020. "Risk-sensitive control of cash management systems," Operational Research, Springer, vol. 20(2), pages 1159-1176, June.
    6. 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.
    7. 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.

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