Treasury focuses on liquidity forecasting and planning, releasing trapped working capital, and making decisions on managing finances and risks. Covid-19 has exacerbated the importance of forecasting with fluctuating revenues and tightened budgets.
However, most times the forecast is not accurate or timely enough for taking prudent decisions. There could be multiple challenges that stem while forecasting cash.
These are the most common root causes for challenges in cash forecasting:
To overcome the challenges, it is important to understand what drivers are under the treasury’s control and which ones are not.
Market fluctuations are beyond anyone’s control but the accuracy in forecasting is something that can be governed. If data is updated frequently and seasonality is tuned into the forecasts, it gives a realistic picture of accounts receivable and accounts payable, despite them being highly unpredictable.
AI-based cash flow forecasting provides better oversight in cash positions by:
Enriched visibility across all cash flow categories such as A/R, A/P, and CAPEX enhances forecast accuracy and also provides real-time information to drive key decisions efficiently.
Excel-based cash flow forecasting involves significant manual work, therefore automating most of the processes that don’t need human involvement alleviates much of this burden and saves a lot of time to focus on high-value activities like analysis and decision making. These are some of the key benefits that Artificial Intelligence provides in the cash forecasting process:
AI helps organizations to prioritize their tasks better and improves forecasting accuracy. This helps the treasury team stay abreast of changing environments and macroeconomic fluctuations that might go unnoticed otherwise.
In the new normal, CFO’s expectations are growing rapidly and the treasury needs to step up to provide strategic value. This can only be possible if they optimize their existing processes with technology.
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HighRadius Cash Forecasting Cloud – an advanced forecasting system – leverages the proven RivanaTM Artificial Intelligence (AI) platform to provide the most accurate cash flow forecasts – right from a ledger account level and rolling up to the organizational level. Delivered as a Software as a Service (SaaS), the solution seamlessly integrates with your company’s ERPs, accounting systems, banks and order management systems. Multiple AI and Machine Learning algorithms process datasets including bank statement inflows/outflows, sales orders/customers invoices, purchase orders/vendor invoices and expense reimbursements for comprehensive as well as accurate cash flow forecasts. The closed-loop, machine learning feedback system ensures that the forecast models become more accurate with time.