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Building Credibility with Artificial Intelligence

What you’ll learn

  • Learn how to identify the purpose of cash forecasting.
  • Learn the differences between direct and indirect cash flow forecasting
  • Understand how AI improves forecast accuracy and contributes to hard and soft dollar savings.

Understanding the Purpose of Cash Forecasting

An accurate cash flow forecast helps companies predict future cash flows, avoid crippling cash shortages, and earn returns on cash surpluses in the most efficient manner possible.

Companies can be classified into two types based on their cash position:

  • Cash surplus companies/Net investors
  • Cash deficit companies/Net debtors

During Covid-19, based on cash position and financial situation, the drivers influencing the purpose of cash forecasting varies as per the following:

Cash Surplus Companies


  • Plenty of available cash reserves
  • Interest rates near zero
  • Focus on business expansion/acquisition

Purpose of forecasting:

  • Reasonable accuracy and frequency
  • Strategic investment planning for long term forecasting for business function expansion through long-term forecasting

Cash Deficit Companies


  • Utilized most of their revolvers
  • Delaying payables
  • Focus on tightly managing cash

Purpose of forecasting:

  • High accuracy and frequency
  • Estimate when available working capitals will fall short and prevent overborrowing through short term forecasting

Direct vs. Indirect Cash Forecasting

There are two methods of cash flow forecasting:

  • Direct cash flow forecasting
  • Indirect cash flow forecasting

Indirect Cash Forecasting

An indirect cash forecast is driven from various projected income statements and balance sheets, generally done as part of the planning and budgeting processes.


  • Various projected income statements
  • Balance sheets


  • Data from existing reports could be used to quickly build the forecast

Direct Cash Forecasting

Direct cash forecasting or short-term forecasting is a method of forecasting cash flows and balances that are used for short-term liquidity management purposes. It’s also called the receipts and disbursements method.


  • Upcoming payments
  • Upcoming receipts


  • Allows for granular analysis with better visibility of cash flow

Causes of Inaccurate Cash Forecasts

Spreadsheets have been the most widely used for cash forecasting for a long time. They hold certain limitations such as:

  • Completely manual and time-consuming process
  • Error-prone
  • Difficulty in gathering the right datasets and consolidating them
  • Frequently requires human adjustments and inputs
  • Inability to compare variance

Due to the limitations, forecasts generated are inaccurate and unreliable. This leads to poor borrowing and investing decisions.

Negative Impact of Inaccurate Forecasts

Poor cash forecasting methods include everything from using ineffective tools to focusing on the wrong factors. Many companies still rely on manual or semi-automated forecasting tools, such as spreadsheets, and these are far from optimal.

Some major impacts of inaccurate forecasts are:

  • Increased Cash Buffers
    • Offsetting any unforeseen costs instead of maximizing returns on idle cash
  • Higher Borrowing Costs
    • Borrowing more from financial institutions at higher interest rates
  • Penalties
    • Some delayed payments come with direct penalties, while other trading partners adjust pricing upwards to compensate for late payments
  • Delayed Investments
    • Postponed investments in the business delay returns and value accretion

Improving Forecast Accuracy

The three most promising technologies to improve forecast accuracy are:

Robotic Process Automation

RPAs are robots that are programmed to run a certain set of tasks with little to no human intervention. This would enable treasury teams to free up a lot of time previously used in repetitive tasks like data gathering and consolidating and focus more on higher-value duties like cash forecasting.


  • Eliminates high-volume and high-transactional tasks for employees
  • Gathers consolidates, and stores data for easy reporting
  • Cuts costs and streamlines processes easily
  • Integrates repetitive and time-consuming processes easily
  • Makes processes more secure and less error-prone due to reduced human intervention

Artificial Intelligence

Artificial Intelligence utilizes self-learning algorithms to identify patterns and changes in them and guides treasurers on what to do. It can track anomalies in transactions and stop them or find shifting behaviors in operations and suggest better alternatives.


  • Takes over complex processes and aids in shifting to higher-value roles
  • Integrates with various systems and collect and process information
  • Analyzes and thinks like a human but within a shorter time frame
  • Helps manage liquidity to optimize usage of cash and prevent avoidable debts
  • Self-learns and improves forecasts in unpredictable situations such as pandemics or recession
  • Auto-reports on various functions such as cash and risk management

Machine Learning 

The machine learning algorithms ultimately impact what the generated forecast looks like. Better quality of the input data used for training produces better output (GIGO).

Using machine learning techniques, treasury teams can get monetary gains, prepare better, plan, and validate data. Also, with these tools, they can be relieved from performing mundane, tedious tasks, allowing them to be a more strategic player and operate in new and more effective ways.


  • Learns in a ‘supervised’ arena
  • Consists of data mining software and predictive analytics
  • Discerns and embarks on an appropriate course of action
  • Requires human intervention to ‘pull the strings’ and define the environment

Artificial Intelligence is the best-fit technology since generates significantly accurate forecasts due to its ability to forecast complex categories such as A/R and A/P with a high degree of accuracy.

Benefits provided by Accurate Forecasts with Artificial Intelligence

Reduced turnaround times for forecasting

Staying on top of market movements or uncertainty with agile forecasting

Accurate cash management

Improved liquidity with faster cash conversion cycle

Reduced the amount of idle cash

Improved capital allocation and risk management for the CFO’s office

Increased strategic investments

Making strategic decisions related to business expansions and M&A

Effect on the Role of Treasurer

The treasurer is able to make confident decisions based on accurate and real-time forecasts, which enhances the credibility of the treasurer in the CFO’s office.

ROI with AI-enabled Cash Forecasting

The three primary accuracy driven ROI factors are:

Hard ROI:

Increased accuracy leads to better debt/investment decisions and less cash on hand.

1. Determine the difference in interest costs that would result from making better judgments (more LIBOR loans, fewer prime loans).

2. Borrowing limits are reduced, and interest rates are improved.

Soft ROI:-

Automation leads to reduced time spent creating, updating, and consolidating forecasts and variances.

1. Calculate the cost of time wasted on tasks that could be automated.

2. Determine the incremental value of other jobs that can be completed as a result of the new time savings.

Intangible ROI:-

Greater confidence and credibility with consistent and highly accurate forecasts.

Increase in Market Valuation through AI-enabled cash forecasting

  • Forecasts with high accuracy from quarter to quarter.
  • More confidence in metrics such as free cash flow.
  • Increased credibility by investors in CFO figures has an impact on stock attractiveness and price.
Watch the webinar to learn more about the value forecasting accurately through AI.

Increasing credibility with AI-enabled cash forecasting

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The HighRadius™ Treasury Management Applications consist of AI-powered Cash Forecasting Cloud and Cash Management Cloud designed to support treasury teams from companies of all sizes and industries. Delivered as SaaS, our solutions seamlessly integrate with multiple systems including ERPs, TMS, accounting systems, and banks using sFTP or API. They help treasuries around the world achieve end-to-end automation in their forecasting and cash management processes to deliver accurate and insightful results with lesser manual effort.