  Cash management is concerned with optimizing the short-term funding
requirements of a company. To this end, different optimization strategies have
been proposed to minimize costs using daily cash flow forecasts as the main
input to the models. However, the effect of the accuracy of such forecasts on
cash management policies has not been studied. In this article, using two real
data sets from the textile industry, we show that predictive accuracy is highly
correlated with cost savings when using daily forecasts in cash management
models. A new method is proposed to help cash managers estimate if efforts in
improving predictive accuracy are proportionally rewarded by cost savings. Our
results imply the need for an analysis of potential cost savings derived from
improving predictive accuracy. From that, the search for better forecasting
models is in place to improve cash management.
