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How Does Online Cash Flow Forecasting Work?

What you’ll learn


What goes on behind the scenes of an online cash flow forecasting software?
Learn the ins & outs of the process of automated cash flow forecasting today!


What capabilities does an online cash flow forecasting tool have?

Today, practitioners want to forecast frequently, with more accuracy, scalability, and visibility. They need a solution that tracks cash movements, supports seamless integration, and drills down to the root cause of variance in forecast vs. actuals. But, gathering data from various sources and global collaboration is painstaking while using spreadsheets, and increases the scope of human errors. The data scattered across various platforms minimize visibility. By the time, the reports are sent, the data becomes obsolete and the lack of recent data poses a threat to accuracy in forecasts, leading to poor decision-making. An online cash flow forecasting software is a SaaS product that has a cloud-based platform: a one-stop-shop storing all that necessary information. It seamlessly integrates with multiple ERP systems, bank portals, and TMS, hence enhancing visibility, and reducing errors. The variance analysis is improved with automation. Real-time information leads to accurate reporting for making efficient decisions.

How exactly does online forecasting work?

Online forecasting is built for treasury and finance teams to manage cash flows and enable real-time visibility through dashboards and reports. It helps in understanding trends based on past information and reduces the complexity in controlling finance by reducing manual and time-taking tasks. Besides, it provides automated data upload and consolidation and allows drilling down to line items for detailed analysis. 

The HighRadius solution is an AI-powered user-friendly SaaS software that delivers accurate forecasts that provide analytical insights into your firm’s liquidity and foresight to its future monetary position and provides confidence to treasurers ensuring business continuity and development. Being a finance expert is now just one cloud away

What is included in the dashboard?

The HighRadius dashboard is tailored to give an accurate high-level view of the present and expected cash movements, you can compare your net closing balance of the past with the current and EOB closing balance. The solution allows you to view those balances in your preferred currency. The graph helps in analyzing when and where you are facing or are going to face a drip in cash. 

How does that data get processed and sorted?

Cash position is tracked seamlessly from a variety of data sources like ERP, TMS, banks, and other accounting systems, or via systems through API integration and FTP. It also supports the manual upload of data. The HighRadius solution then feeds the data into a sheet in your preferred format. For data processing, open invoices are matched against certain parameters such as DSO, and the payment date is predicted. This can be done on an invoice, customer, company, bank, or regional level.

What information is available from these forecasts?

The forecast provides global cash visibility. The dashboard assists in viewing forecasts by days, weeks, or months, and filtering forecasts for different cash flow categories, subcategories, entities, regions, or companies. Excel on Web facility enables manual input by users to make adjustments that automatically reflect in the forecast to prepare for several situations. Variance analysis offers an end-to-end performance review based on the difference in actual vs forecast to spot the anomalies and fix them. Machine learning improves the accuracy forecasts continuously by reducing the variance with the help of previous bank statements.

How is this information shared or reported?

The data is sent in a supported format into ERP, or TMS, or Excel for reporting. The information is exported into Excel, Text, or PDF format and stored for future reference. The stored data is used for planning short-term and long-term goals and provides correct data to higher treasury authorities for scrutinizing problematic areas and taking further steps.

Frequently asked questions

What is cash flow?

Cash flow is the total amount of cash flowing in and out of a company’s bank account. Cash flow is broadly classified into three types:

  • Operating: Cash flow related to the sale of goods that contribute to the income.
  • Investing: Cash flow from assets, plants, long-term investments, and loans.
  • Financing: Cash flow concerning owners’ equity and noncurrent liabilities such as repurchases or stocks, and cash dividend payments.

Why do you need cash flow forecasting?

Cash flow forecasting is essential as it helps in keeping afloat with the current cash flows and estimates how much cash a company will have in the future. Plotting the cash movements of each area of business helps in identifying potential business risks since it assesses when there is a possibility of debt so that a business can either borrow loans at a low interest rate or invest for long-term financial security. It identifies late-paying customers, which helps in collecting payments against invoices earlier. Thus,  cash forecasts help in taking proactive decisions, saving both time and effort.

How does online cash flow forecasting differ from traditional cash flow forecasting?

Traditional cash flow forecasting includes reports of estimated sales, turnover, and other trading expenses. It is mostly done yearly or quarterly. The data is gathered and entered into spreadsheets to make a report. Manually entering data can make room for human errors. The outcome is huge gaps between forecasts and actuals. Manual extraction and merging of data require a lot of effort, but the hard work goes in vain due to the high chances of data loss. The inflexibility and inaccuracy cause financial distress and comes with a great cost of business downfall.

How much time is typically saved with online cash flow forecasting?

Online cash forecasting saves significant time and cost since automation eliminates the manual tasks, for instance:

  • Finding data from different spreadsheets and combining them.
  • Paying lockbox fees to banks to gather bank statements.
  • Collaborating manually with different accounting teams to gather various cash flow data.

The amount of time saved depends on the ‘as-is’ and ‘to-be’(i.e. the current state and the future state), and the number of people involved in the process. On a rough estimate, around 20% of a week’s time is saved. The time saved can be spent on activities that add more value to the organization to increase profit.

How accurate is online cash flow forecasting?

The accuracy of online cash flow forecasting varies for different companies, the source data, type of technology leveraged, and the visibility level. Moreover, the purpose of forecasts can vary: a cash deficit company may forecast aggressively, explore credit options and focus on performing scenario analysis to monitor risks, whereas cash-rich companies may perform long-term forecasting to improve results, search for growth opportunities and focus on investments, M&As, and FP&A decisions. Some online cash forecasters may lack Excel on the Web to populate inputs to perform forecast vs forecast. Typically, long-term forecasts are less accurate than short-term forecasts because of some unknown changes like changing FX rates, recession, etc.

In conclusion, forecasts can hardly be 100% accurate, but by choosing the right process, resources, AI/heuristic models for appropriate cash flows, time-series algorithms, and technologies, the forecasts can be made 95% accurate.

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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.