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IBM Planning Analytics Tips & Tricks

Cash Flow Modeling with IBM TM1

 

Tips & Tricks

March 15, 2016

By Don Cole

As a senior consultant with Revelwood for nearly seven years, I’ve had the opportunity to design and develop a large number of TM1 models for various aspects of budgeting, planning and forecasting. Some client engagements are very straightforward – simply transition the business from spreadsheet-based budgeting to TM1. This gives them greater flexibility and visibility while significantly reducing the amount of time spent on the budgeting process. All good and necessary stuff to properly manage an organization’s finances in today’s fast-paced business environment.

But every now and then, I’ve also had the opportunity to design and develop a TM1 model that’s completely new – not just a “standard” financial accounting activity, or a modification required for a specific industry. And that’s when my job is really fun.

One recent client engagement is a perfect example of doing something new in TM1. We developed a cash flow model designed specifically to reflect the reality of the business situation along with addressing the complexity of a multi-billion dollar business. Often, finance executives and analysts look at a forecast and focus on net income, sales or profitability. But what’s equally important is the impact those variables will have on cash.

On one hand it’s pretty simple. The more net income you have, the more cash you are going to have. However, our client wanted to say, “Based on our forecast, if I keep $100 million in cash, how much will I need to borrow or repay on my debt?” To get to this, we needed the model to reflect the entire business, including the forecast net income, capital expenditures and shareholder dividends. It needed to include everything we know about all the transactions, and how they impact the end result.

This may sound very different from “traditional” forecasting, but in fact, it’s just taking it one step further. At its simplest, it’s about taking all the known information and modeling that information so that the client can look at it in a different way. And that, to me, means there is always something more we can do with TM1. It’s not limited to basic budgeting and forecasting. In fact, operationally, you can measure any metric or KPI and create dashboards for them. Projects like this one – ones that push TM1 past the basics – are fun and engaging to work on.

Author

  • Don Cole

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