EuroFinance

Unilever, a consumer goods powerhouse, took a bold step towards enhancing its cash forecasting capabilities, foreseeing the implications of a rising interest rate environment. Not deterred by the enormous scale of its global business, Unilever’s treasury team brought standardisation to its core processes across the board, effectively yielding accurate and timely source data for cash position forecasting. The upshot? A crystal-clear global snapshot of its cash along with the ability to pinpoint payables and receivables flow across regions and business divisions.

With an impressive portfolio of more than 400 household name brands spanning over 190 countries worldwide, and an average of 3.4 billion people using Unilever’s products every day, the company’s global reach and historical growth rendered cash flow forecasting a herculean task.

An assortment of disparate cash flow forecasting processes had been employed across Unilever’s treasury operations: certain regions offered no forecasts, while others – like Brazil, Indonesia, and the Philippines – attempted detailed, yet labour-intensive and manual processes. This methodical mayhem reduced the team’s visibility in forecasting  cash and underlying cash flows, often leading to unexpected late adjustments to its cash position and needs. Unilever’s robust credit rating ensured easy and cheap borrowing, but the treasury team foresaw the end of the era of historically low interest rates, prompting a need for superior cash flow forecasting.

Navigating the challenges

To address these challenges, Unilever’s global treasury centre in Switzerland sought to improve its global cash flow forecasting. The company looked to centralise forecasting by tapping into its universal data lake and integrating additional data sources from its Treasury Management System (TMS) and bank platforms.

The vision was clear: automate forecasting processes, enhance workflows, and ensure better and timely visibility over cash balances. A future-proof solution was needed, one that required minimal ongoing IT requirements, was easily scalable, and offered a broad range of connectivity options.

Through tight collaboration with a third-party vendor and its banking partner, the treasury team overcame initial data quality issues, ensuring a smooth operational launch of the solution in less than five months. The business impact was profound. Unilever gained an innovative technology that integrated seamlessly with its data lake, while also offering frequent updates and the ability to add new data sources as required. Real-time data via APIs, bolstered the treasury team’s confidence in its cash position and improved its responsiveness to changing conditions.

Results and lessons learned

The implementation has considerably improved Unilever’s cash management. From short-term forecasts, the company now confidently looks ahead up to three months, enjoying an improvement in forecast accuracy from 50% to 80% in most categories at the three-month horizon. Unilever now confidently makes longer tenor investments, yielding better returns and reducing the workload for the global treasury team. With this new efficiency, the treasury team anticipates annual benefits of €1.5 million once the solution is fully operational across all regions.

Furthermore, the treasury team went from a strictly near-term cash flow visibility to a comprehensive 13-week forecasting horizon, greatly reducing the likelihood of cash flow surprises. The team can now fine-tune its use of foreign exchange swaps and has immediate access to its source data, which is fully integrated with the TMS. The company is now positioned for quick incorporation of new entities and their datasets, thanks to the solution’s scalability.

The successful deployment of a layered direct cash forecasting methodology, coupled with high levels of automation and efficient workflow management, has brought Unilever significant process efficiency, giving staff more bandwidth for other initiatives. The company now benefits from accurate future cash positions, facilitated by offsetting direct forecasts by payer behavioural trends. Moreover, Unilever’s back-office systems, banks, and third-party vendors were connected swiftly, sparing Unilever’s IT team any heavy lifting.

Unilever’s venture represents a triumphant execution of an ambitious cash flow forecasting solution, conducted within a challenging five-month timeframe, for a company of Unilever’s magnitude and global scale, this accomplishment sets a new benchmark.

Step outside of the day-to-day, benchmark your operations and future-proof your strategy alongside 2,000 senior treasury leaders this September 27th-29th in Barcelona. On the theme of “Navigating a new world,” this year’s agenda will empower treasurers to tackle today’s new and complex challenges and optimise treasury for the new economic cycle. Hear from 150 world-class speakers including treasurers from eBay, JTI, Under Armour, Booking Holdings Inc., Airbus, News Corp, L’Oreal, Anglo American, Dr Martens and many more. Find out more