Harness the Power of Banking Data to Access INSTANT and ACCURATE Cashflow Forecasting

The rise of FinTech is beginning to have a real impact on the financial industry.  Like many other companies, Bankhawk has invested resources in research and development in the area, particularly in cash flow forecasting. In the last two years, Bankhawk has had a chance to work on projects together with its own customers from different industries. These projects delivered significant business value to customers. They also helped Bankhawk develop a validated software solution, which enables corporate finance executives to access INSTANT and ACCURATE cashflow forecasting.

Why is cash-flow forecasting so important for corporate finance?

Not everyone involved in finance understands just how far-reaching the benefits of cash-flow forecasting are. Generating reliable and efficient cash-flow forecasts has proved to be an elusive issue for treasurers globally. So, what exactly are the challenges?

• How do corporates determine borrowing needs or have an early warning system for potential cashflow issues?
• How do corporates evaluate an approach to test the viability of new products, ventures and markets?
• How confident are corporate finance executives that they are maximising their cash position? Do they have the ability to uncover “trapped” or “hidden” cash?
• How do corporates understand their future cash positions to support all strategic business decisions?
• In a situation where most or all liquidity needs are well managed, how do corporates optimise their net cash position to achieve significant savings in bank fees and interest charges?

With so much to gain by addressing the above challenges, corporate finance executives need to pay some serious attention to their own forecasting approach.

Why did Bankhawk Analytics choose to focus on this area?

If current solutions are good enough, there is no point in Bankhawk Analytics entering this ‘red ocean’. Bankhawk’s initial reason for innovation in cashflow forecasting is because banking data is used in most forecasting approaches together with other data such as payroll and supplier information from ERP systems, hardcopies of customer invoices, etc. As Bankhawk is primarily dealing with corporate customer banking data, cash flow forecasting presents a strong opportunity for Bankhawk to expand its software solutions. By conducting comprehensive market research and collecting feedback from Bankhawk’s existing customers, we decided to pursue this opportunity for the following reasons:

• More than 2 in 3 corporate finance executives feel that cash flow forecasting is not accurate due to the challenge of business changes and managing errors and omissions within financial information. Some of Bankhawk’s customers feel that their current forecasting approach does not support their business requirements.
• Almost every corporate finance executive struggles to get up-to-date information for cash-flow forecasting as a result of either technological restrictions or operational delays. Some of Bankhawk’s customers complete their cash-flow forecasts almost 4 weeks after their data becomes technically available.
• Most Treasury Management Systems (TMS) have integrated cash-flow forecasting tools, however less than 10% of corporate finance executives use TMS for forecasting. Within these 10%, less than half are satisfied with their current forecasting module. The other 90% of corporate finance executives use Excel for cash-flow forecasting. These spreadsheet solutions prove to be loosely developed and poorly documented and are very much error prone.

There is another source that indicates most companies struggle with varying degrees on visibility and forecasting. See chart from the Bank of America Merrill Lynch SunGard Asia Pacific Treasury Management Barometer.

Is it good enough to use banking data ONLY for cash-flow forecasting?

When developing their initial model for cash-flow forecasting, there were three key factors that Bankhawk had to consider carefully: Is it a generic solution that can be used across different industries? Is it a scalable solution that can be easily adopted by large numbers of corporates? Is it a complex solution to develop and ultimately deploy for corporates?

Bankhawk is satisfied that it can address the first two questions outlined above. As regards the issue about the complexity of the project, Bankhawk management need to ask the question as to whether it is good enough to use banking data ONLY for cashflow forecasting? Our research and domain expertise tells us that the facts are as follows:

• It depends on the industry. For example, retail businesses have less concern regarding uncertainty around future receipts and payments such as unpaid direct debits and cheques. By comparison, unpaids are very much prevalent in the insurance business. In this case, we found that banking data reflects very well on how business is going for retailers. By looking carefully at many of our customers’ banking data across multiple industries, we believe the solution will work well in other industries, such as university, health and retail, etc.
• It depends on how corporates manage their finances. Each corporate has its own method. It depends on the centralization level of their finance function, the business’s commercial and geographic distribution, the existing finance policies in place, the software they use to manage their finances and how effectively they utilize their software solution. Sooner or later, corporates will need to transform their finance function. After that, a centralised and live banking data warehouse can support cash-flow forecasting.
• It depends on the banking platforms that corporates use. Online banking platforms across the globe have evolved considerably over the last 20 years. Corporates can access electronic statements in different formats instead of having to rely on physical statements. Transaction information provided by banks is more transparent and informative. Most banks provide powerful platforms and APIs for customers and third parties to access banking data securely. A few frameworks have even been implemented, or are being implemented, to enhance the standards and quality of banking information including SWIFT and PSD2. Bankhawk has found that bank technology has improved significantly when comparing our current analytics projects to those we completed 4/5 years ago.

The answer to our initial question is not simply YES or NO, but it confirms that there is minimum risk for us. We believe that there is huge market potential for cash-flow forecasting based on banking data. Recent successful cash-flow forecasting projects completed for our corporate customers prove that we are indeed headed in the right direction.

What is Bankhawk’s angle at delivering a better solution?

When designing a successful product, how you enter the market is critical. There is little room for error here. If your angle is off, your product will fail amidst the competition. The following describes Bankhawk’s angle at delivering an innovative cash-flow forecasting solution:

Firstly, Bankhawk Analytics’ cash-flow forecasting tool uses banking data only.

Secondly, based on the quality of banking data available today, corporate bank customers can access INSTANT and ACCURATE cash-flow forecasting. It is INSTANT because banking data is an immediate source of financial records. Bankhawk’s cash-flow forecasting application provides forecasts within seconds of bank transaction records presented via online banking. Banking data is black and white – it will not lie to you. Furthermore, banking data is becoming increasingly rich with the evolution of financial institutions’ online platforms. It has, or will have, better ACCURACY compared to any other financial information that is available.

Finally, who are our competitors? Bankhawk’s cash-flow forecasting solution competes against traditional Treasury Management System (TMS). Implementing TMS can be very costly and onerous for corporates. Bankhawk’s solution is aimed as an alternative to spreadsheets and to enable corporate finance executives to have a simple and powerful tool for cash-flow forecasting.

How exactly does Bankhawk Analytics deliver “INSTANT” and “ACCURATE” cash flow forecasts?

Bankhawk Analytics’ solution harnesses the power of banking data to allow corporates to access INSTANT and ACCURATE cash-flow forecasting.

Data aggregation for building a proper banking data warehouse is the first step in delivering our analytics solution. Bankhawk provides a live banking analytics window to corporates, so that all banking data is accessible from a single location and contains all the latest bank transaction records. First, we must focus on developing cash-flow forecasting by developing a live data warehouse.

Bankhawk encountered difficulty when sourcing a banking data aggregation solution. Bankhawk initially dealt with a leading bank account aggregation service as well as a SWIFT Service Bureau. However, both options were not suitable for our solution due to the complexity of corporate banking. Bankhawk has invested considerable resources in attempting to resolves this issue. Bankhawk developed an innovative approach by combining web simulation and ETL (Extract, Transform, Load) technology. The approach successfully synchronized corporate banking transactions across multiple banks, validating both transaction volume and balances for all bank accounts within minutes. With this capability, Bankhawk Analytics is able to provide INSTANT cash-flow forecasting by using banking information.

There are four key factors to managing cash-flow forecasts’ ACCURACY:

1. Up-to-date information is needed. Bankhawk has addressed this by developing a bank transaction synchronization function as described above.
2. Every bank transaction needs to be grouped accurately into a predefined financial structure. For example, a record denoting a receipt from a client needs to be grouped into sub group “Client X” under a group that can be labelled “Receipts”. A record denoting a payment to an audit company needs to be grouped into a sub-sub group that might be labelled “Accounting” under a sub group labelled “Supplier Payments” under a group called “Accounts Payable”. We overcame this challenge by combining our own multi-level rule-based engine with widely-used supervised learning algorithms. To date grouping accuracy has reached approximately 99.5%.
3. We have integrated some of the latest techniques from data science technology to improve the accuracy of cash-flow forecasting. Bankhawk has applied time-series models to banking data. Also, the forecasting outcome is derived from extensive mathematical modeling and computations utilising advanced statistics and machine learning forecasting algorithms. A number of algorithms such as ARIMA, Exponential Smoothing and Regression are run on the data and Bankhawk365 automatically selects the optimum model.
4. External market data and statistical information can be integrated to further improve accuracy. Bankhawk365 contains a database of market information to enrich cash-flow forecasting. Our forecasting can access external data sources including interest rates, unemployment rates, GNP and GDP, weather, wholesale prices, Consumer Price Indexes, emigration/immigration, life expectancies, population/age, inflation rates, etc. Incorporating external factors into the forecasting model gives more powerful insights into corporate banking and financial activity.

To enhance both INSTANT and ACCURACY, Bankhawk Analytics also collaborates with SAP. We have integrated with SAP HANA, an in-memory, column-oriented, relational database, into Bankhawk’s cash-flow forecasting software. Bankhawk Analytics using SAP HANA supports ‘Big Data’ analytics and the application won the global award of “Most Transformative” at SAPPHIRE NOW 2014 out of 1,900 competing companies.

What does Bankhawk Analytics cash-flow forecasting solution look like? The following screenshot shows Bankhawk365 cash-flow forecasting module with dummy data.

Case studies from various industries

Bankhawk Analytics has been working with a number of corporate customers from the health service, retail, university, insurance and financial services sectors to establish relevant use cases. Our new cash-flow forecasting application has proven very successful with these customers. Although the solution is at an early stage, feedback received to data has been very positive.

One of Bankhawk Analytics’ largest clients is one of the largest public sector organisations in Ireland. The challenge they face is a major delay in financial reporting. It is approximately 4 weeks before their finance team can get an accurate report for the previous month. The major reason for this is the difficulty they encounter when analysing revenue income and sourcing reports from different regions. Bankhawk’s solution helps them to access the same report while reducing the time delay from 4 weeks to 24 hours and still covering information from all regions. Via Bankhawk365’s online dashboard, the client can see cash-flow forecasting for the remaining months of the current financial year. This helps them significantly when making key decisions as regards budgets and financial planning.

Bankhawk Analytics has been working with two of the largest retailers in Ireland to improve their cash-flow forecasting. Both companies currently use spreadsheets to manage their cash-flow forecasting for the next 7 day and 4 week periods. They believe that their forecasts are not sufficiently accurate to support them in making key decisions as regards cash management. Bankhawk worked with them to generate a completely new cash-flow forecast by applying the same spreadsheet templates that they were using to manage both banking data and external market information. Both companies have started to use Bankhawk Analytics’ solution recently and the initial feedback is very positive.

Bankhawk Analytics has also been working with a number of universities in Ireland. Following the completion of initial analytics services projects whereby significant savings were generated, the universities have approached Bankhawk to help them improve their cash-flow forecasting. University business are typically consistent with seasonal elements as regards student fees. Finance teams in universities encounter payroll each month, conference and accommodation receipts throughout the year and a spike in student fees in August and September. All of these activities are accurately reflected in their banking data. The project is still ongoing, but Bankhawk believes that universities can get instant access to very accurate cash-flow forecasting by harnessing the power of their banking data.

Not only an innovative solution, but pricing and on-boarding are evolving, too

Bankhawk Analytics’ software solution pays for itself. The genesis of Bankhawk was originally as a cost-savings company that have helped corporates to save millions in recent years through the delivery of analytics services. We are now focusing on the value that our software can deliver and the savings that it can continue to generate. Bankhawk365 is available through either a monthly or quarterly license fee. This fee will pay for itself, as the software continually generates savings for the client and improves their business intelligence.

Bankhawk’s cash-flow forecasting solution is easy to implement and deploy for corporates. It is a SaaS (Software-as-a-Service) model. Corporates will not need to invest huge amounts of resources in hardware and training as the software can be accessed through any web browser. It is non-intrusive, which means it does not rely on other financial systems, such as ERP or Cashbook. All that a company needs to do in order to get started is the initial setup of banking data synchronization and the customisation of their cash-flow grouping rules.

Corporate software sales are sometimes complicated and time consuming. Bankhawk’s approach is creative to make it simple.

Lastly, why Bankhawk?

Bankhawk is banking expertise, home to teams of both former bankers and computer science PhDs. Bankhawk is a young and innovative company that combines banking domain expertise and the latest technology. We are fortunate enough to have a great team who share the vision of a better connected banking world. We strive to help our customers simplify their banking activity and better manage both their businesses and their cash. We see huge changes in banking over the next five years, and we believe that Bankhawk365 will provide companies with the best way to capitalise on that change and become more successful by adapting to the latest banking trends.