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Everything CFOs need to know about the journey to leveraging cash flow forecasting software

What you’ll learn


  • Learn why automated cash flow software is needed by the CFO.
  • Learn the key benefits of cash forecasting software for the CFO.

Why is it necessary for CFOs to leverage cash forecasting software?

Challenges faced by a CFO

The following are the top four challenges that CFOs face:

  • Technology: As CFOs need to make decisions for the future, they must embrace digital transformation to increase the ability to scale swiftly. However, some CFOs are still hesitant to adopt technologies such as AI and RPA because of concerns about dependability, security, and the potentially steep learning curve required to train end-users.
  • Strategy: Treasury is vulnerable to market volatility, and every CFO should consider whether their finances are sustainable enough to get them through a crisis. To ensure treasury is sustainable, CFOs need to start focusing on forward-thinking strategic planning rather than the transactional tasks that now consume the majority of their time.
  • Regulatory compliance: The vital requirement to stay on top of new regulations that could affect the company’s financial bottom line continues to be a major concern. The ripple effect of new regulations can have a significant impact on a company’s strategy.
  • Manage complexity: It is challenging to integrate data from disparate sources. Moreover, cash flow categories such as A/R and A/P are unpredictable. Not using a suitable model for forecasting such complex categories and not being able to capture trends/patterns in customer payments leads to high forecast inaccuracy. As a result, CFOs don’t get accurate insights to make effective business decisions.

Companies that consider the CFO role as more about reporting than planning will be at a competitive disadvantage in the near future. To make informed decisions, finance executives must ensure that their management teams have access to timely data.

CFOs, particularly in small and medium-sized businesses, wear many hats. In addition to their traditional CFO duties, they are examining cyber security threats, managing systems, and data integration, filling skill gaps, and evaluating better technologies and software. Robotic Process Automation is used to automate data aggregation from multiple sources. It eliminates human errors and helps treasury focus on high-value tasks like decision-making. It also gathers cash data into a single dashboard, allowing it to simply eliminate manual operations and start monitoring, analyzing, and automating cash reporting, forecasting, and workflows. Technologies such as AI forecasting software have more to offer to the CFOs.

How does AI cash forecasting software assist the CFO?

Global markets remain turbulent, and accounting for unexpected uncertainty has become the norm. So, CFOs should embrace robust software for cash flow forecasting to become strategic advisors in their organization. The following are some of the reasons why using the right AI forecasting software can help the business grow:

Accurate modeling

Technical expertise, as well as the bandwidth and tools necessary for proper modeling, are frequently lacking among treasury employees. Because some cash flow categories demand distinct models and data, it’s important to look at how data is incorporated into the models. Heuristic models, for example, are used for Payroll, Expenses, Taxes, CAPEX, Investment & Debt, whereas AI models are utilized for forecasting A/R and A/P. With the help of centralized software, forecasts can be created accurately with suitable models and rolled up from regional to a global level for various entities, company codes, categories, and subcategories.

Benefits of accurate modeling

  • AI enables the incorporation of external factors such as business cycles, seasonal trends, different payment terms, and discounts/rebates in order to obtain a more accurate forecast for A/R and A/P.
  • Using suitable models also helps to get increased granular visibility, and the treasury team can drill down into different cash flow categories across different time periods, entities, and currencies.

Capture customer-centric variables

It is critical to collect customer data in order to determine trends and patterns in payment behavior. Spreadsheets have a restriction on the number of variables that can be entered. Some accounts’ behavior can be tracked using the ADP technique or weighted average, however, others with discount rates are more difficult to track.

Benefits of capturing customer-centric variables

  • The AI cash forecasting system improves over time by learning from the data- by comparing historical and current data to analyze trends. It also captures multiple variables, hence it forecasts invoice due dates precisely.
  • Customer-specific variables are easily recorded in order to uncover patterns in different customer payment behavior. Thus, CFOs can understand customer payment behaviors and leverage strategies to improve their receivables.

Improve scenario analysis

An AI cash flow forecasting software assists treasury in improving scenario analysis to prevent cash shortages since it provides the foresight to track current and potential cash shortages with drill-down capability using dashboards.

Moreover, the software also helps CFOs learn when and where they’ll have surplus cash in the bank, as well as seeing when the surplus will occur. Hence, they can better plan for investment and expansion activities.

Benefits of accurate scenario analysis

  • By estimating the impact of anticipated future events and situations, AI forecasting software assists businesses in managing risks more proactively.
  • It can assist companies in making better decisions by examining the risks and rewards of various options through accurate stress-testing of best and worst-case scenarios.

Improved analysis and reporting

AI forecasting software can create high-quality reports in real-time with drill-down capabilities. It gives a fair and consistent examination of a company’s financial health by determining cash deficits or surpluses by tracking cash flows and planning accordingly for investment and borrowing.

Benefits with improved analysis and timely reporting

  • Accurate cash flow analysis enables a company to be proactive rather than reactive, and it highlights a company’s most profitable revenue streams with immediate updates on when and where money travels inside corporate accounts.
  • Improved reporting increases the credibility of the organization and helps to build and improve relationships between external stakeholders, investors, and the board of directors.

Accurate and frequent variance analysis

AI forecasting software uses closed-loop feedback to reduce the variance over time. A feedback loop allows the AI model’s projected outputs to be reused to teach new models.

Benefits of accurate and frequent variance analysis

  • The system shows the deviation between the forecasts and actuals, with the amount and the variance source. This helps to make improvements in forecasts for building forecast accuracy in the future.
  • The treasury team also has more bandwidth to perform frequent variance analysis over both short-term and long-term time horizons, such as daily, weekly, and monthly. This allows treasury to make adjustments in forecasts and reduce variance to create highly accurate cash forecasts.

Get in touch with our solution experts to know more about the benefits of a cash forecasting solution for the CFOs.

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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.