Cash Forecast Accuracy

Cash forecast accuracy is a measure of how closely a treasury team's predicted cash receipts, payments or closing balances match the amounts that actually occur. It is usually tracked as a cash forecast variance, the difference between actual and forecast figures, or as a percentage error, and is reported separately for each horizon, such as the next day, the next 13 weeks and the next year, because short-range forecasts are normally far more accurate than long-range ones. Teams often review accuracy by business unit and by cash flow category, for example customer receipts or payroll, to find where errors come from. Better accuracy lets a company hold smaller idle balances, borrow less and invest surplus cash with more confidence, which is why it is a common key performance indicator for cash forecasting. Also see treasury management and budget variance.