Many thanks to the members and attendees of the GCBG 2018 H1 Meeting last week in Leawood, Kansas.
Forecasting Cashflow: Treasury’s Ongoing Challenge. One treasury operations manager described the company shifting to the SAP treasury management system (TMS) from Quantum, now a part of FIS. Still split between the systems, treasury is developing the analytical piece to better project cash inflows and outflows while creating a framework touching departments such as human resources and legal, to capture the unpredictable, one-off elements impacting cash.
• Takeaway: People Input is Key. “What really drives forecasts are the things we can’t forecast,” noted one member. Hence input from relevant executives around the company is essential. Another member described the Excel spreadsheet “with a lot of macros” that her treasury sends out to those officials, showing the cash forecasts relevant to them and asking them to adjust for the one-offs. Top-level management emphasizing the importance of that communication is essential, she said. Read more about cash forecasts here.
New Tax Law Reneges on Territorial System, Imposes Global Tax. Republicans originally promoted a significantly lower corporate tax rate and a territorial tax system similar to virtually every other developed economy, where only domestic income is taxed. The new rate of 21% is among lowest worldwide. However, in the view of tax experts at Ernst & Young, the law institutes a hybrid system containing elements of a territorial system but requiring multinationals to pay at least some tax on overseas earnings.
• Takeaway: No Rush. NeuGroup Peer Research shows 39% of responding members expect their companies to repatriate between $1 billion and $9 billion, with 6% more than that amount, and 11% between $500 million and $1 billion. But 34% don’t anticipate repatriated cash to be fully deployed until at least the latter part of this year, and another 20% well into next year.
• Takeaway: Hybrid System Upends MNCs’ Financial Structures. No more trapped cash, but where will the cash go? And how will carefully planned financial structures change, to optimize tax exposures? The complex global intangible low-taxed income (GILTI) provision levies an effective 10.5% rate on certain foreign income, while the base erosion & anti-abuse tax (BEAT) imposes a minimum tax to limit deductibility of certain payments to foreign related entities.
Data Science: A Cross Functional Endeavor. Data experts from C2FO, essentially a late-stage start-up whose business model relies heavily on recognizing data patterns, discussed its approach to applying data science. The combined processes comprise rule-based machine learning and logic-based artificial intelligence, defined respectively as computer programming that accesses data to drive outcomes from a set of signals and patterns, and the use of “intelligent machines” that work and react like real humans.
• Takeaway: Communication, Communication, Communication. Constant communication and collaboration between treasury, IT, the business, and other relevant departments is essential to ensure the data solution meets users’ needs and the strategic goal, and avoids a resource-draining, finger-pointing.
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