FICO Treasury Part 1: Cash Position and Liquidity Forecast

📌 KEY POINTS
✅ Cash position shows today's and near-term balances per bank account; liquidity forecast shows expected inflows and outflows over weeks or months.
✅ S/4HANA Cash Management reads flows from the universal journal and operational documents through a one-exposure view of cash flows.
✅ Bank statements make the cash position real; open AP, AR, orders and planned items make the forecast.
✅ Liquidity items classify flows (e.g. customer receipts, salaries, taxes) so forecasts are readable and comparable with actuals.
⚠️ A forecast without reliable payment and due dates on documents is just a list of open items.

━━━━━━━━━━━━━━━━━━━━
▶ WHERE WE ARE
This series covers the cash side of finance. Part 1 explains what treasurers look at and where the numbers come from.

━━━━━━━━━━━━━━━━━━━━
▶ 1. TWO VIEWS OF CASH
The cash position answers 'how much do we have now and in the next days, per account and currency', and is used to fund accounts and avoid overdrafts. The liquidity forecast answers 'what will come in and go out over the next weeks and months', and drives borrowing, investing and hedging decisions. Both must agree with the books, but they serve different horizons.

━━━━━━━━━━━━━━━━━━━━
▶ 2. WHERE THE FLOWS COME FROM
In S/4HANA, Cash Management collects flows from posted bank statements, cash-relevant GL postings, open payables and receivables with their due dates, and operational documents such as purchase and sales orders, together with manual planned items. These are stored in a common flow table so cash reports can drill down to the source documents.

━━━━━━━━━━━━━━━━━━━━
▶ 3. LIQUIDITY ITEMS
Each flow is classified with a liquidity item, such as receipts from customers, payments to suppliers, payroll or tax. Derivation rules assign them from GL accounts, document types or other fields. Good liquidity items make forecast-versus-actual analysis possible; a single 'other' bucket makes the forecast useless for decisions.

━━━━━━━━━━━━━━━━━━━━
▶ 4. ACCURACY DRIVERS
Forecast quality depends on dates and data: payment terms on invoices, realistic expected receipt dates for customers who pay late, planned dates on purchase orders, and recurring items like payroll entered as plan. Treasurers usually adjust with their own knowledge, but every adjustment should be visible as a planned item, not a spreadsheet override.

━━━━━━━━━━━━━━━━━━━━
▶ 5. DAILY ROUTINE
A typical morning: import bank statements, check the cash position per bank and currency, fund or sweep accounts, review large expected flows, update planned items, and compare yesterday's forecast with actuals. SAP Fiori apps for cash position and liquidity forecast support this, with drill-down to the documents.

━━━━━━━━━━━━━━━━━━━━
▶ STEP BY STEP

1. Open the cash position for one company code and identify sources of today's balance.
2. Display the liquidity forecast for four weeks and drill into the largest outflow.
3. Check liquidity item derivation for three GL accounts.
4. Compare last week's forecast with actual bank flows.

✅ CHECKPOINT: you can explain where each number in the cash position and forecast comes from.

A group's liquidity forecast always showed large customer receipts on due dates that never arrived, because several key customers paid 20–30 days late. Expected receipt dates were adjusted using customer payment history, and the forecast error for receipts dropped sharply within two months.

• Everything classified under one liquidity item.
• Forecasting receipts on due dates for late-paying customers.
• Treasury adjustments kept in spreadsheets.
• Bank statements imported late, so the cash position is stale.

• Meaningful liquidity items with derivation rules.
• Use payment behaviour for expected receipt dates.
• Planned items for known non-document flows.
• Daily statement import and forecast-vs-actual review.

Interviewers ask the difference between cash position and liquidity forecast, where S/4HANA gets the flows, and what makes a forecast reliable.