Accounts receivable forecasting is particularly challenging as it is entirely in the client company’s hands. While payment terms are agreed upon, customers might not always adhere to them, adding an element of unpredictability to the process.
Further challenges that make forecasting A/R difficult include:
Sheer volume of invoices
Range of systems creating data variability
Number of entities involved
Factors Causing Unpredictability in A/R
Why Is Accounts Payable Difficult to Forecast?
In the case of A/P, the forecast is accurate in the short-term, up to the next 2 to 4 weeks.However, it is in the longer run that the accuracy takes a hit because of uncertainties revolving around payments.
Challenges when forecasting A/P are:
Difficult to predict payments for which invoices haven’t arrived yet from suppliers
Increased variability during seasonal rebate programs
Volatility in payment dates and timings during CAPEX projects
Factors Causing Unpredictability in A/P
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