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Top Cash Forecasting Tools for Mid-Sized Enterprise Businesses

What you’ll learn

Looking for the best cash flow forecasting software for Mid-sized enterprises?
We’ve highlighted some of the best forecasting tools for mid-sized businesses.

Why is cash flow forecasting important for Mid-sized businesses?

Mid-sized businesses find cash flow forecasting quite critical. They are more vulnerable to cash crunches but they can tackle such problems through a proper cash forecasting tool and reduce their chances of insolvency or inability to properly fund growth. Cash flow forecasting prepares a firm to function without financial concerns and creates a pathway to envision business objectives for the near future and the long run.

How does cash flow forecasting differ for mid-sized enterprises compared to bigger enterprises?

Depending on the size, revenue, and headcount of the business, the cash flow forecast differs between a mid-sized business and large enterprises. Mid-sized firms have revenue of between $50 million to $1 billion, whereas large enterprises have a revenue worth $1 billion or greater. Mid-sizved firms have a headcount of 50-250 employees and deal with cash flow tracking and bank financing for minimizing risks while a bigger firm that has around 250 or more employees focuses on M&A, business acquisition and growth, and FP&A planning, with a wider variety of financing options.

Treasury Team Structure

  • A mid-sized business usually lacks a specific department for treasury or has departments for AR, AP, and Payroll, with a professional finance team including an Accounting Manager and a full-time CFO.
  • Large enterprises often have a bigger finance team. Their team includes the CFO, VP of Finance/ Treasury, Controller, Treasurer, Analysts, Managers, and Accountants for Tax and Finance Management, as well as functional leads for procurement, accounts receivable, and FP&A.

However, this team structure may differ from one company to another, and the roles may also intersect.

The downside to the huge structure of the finance team is that they work in silos, which makes decision-making complex. To overcome this, it is imperative to encourage communication in and across departments.

On average, treasury staffs devote 84% of their time to low-value activities. Highly skilled finance professionals still spend half of their time processing transactions rather than focusing on forward-thinking. The manual tasks increase errors and complexity. Moreover, cash flow prediction needs a large quantity of data to predict behavior and outcomes with utmost accuracy. Thus, while carrying out a forecast from a predictive model, a lower amount of data reduces the accuracy of the output. Big businesses have more array of inputs but mid-sized businesses have fewer data, so they rely more on guesswork, which causes anomalies in forecasting. Larger companies have huge chunks of data and automated models/ tools in place to fuel their forecasts. But the mid-sized firms face hurdles with historical data, so they need to select the most appropriate tools that align with their businesses to improve forecasts.

What should you include in a cash flow forecast for Mid-sized businesses?

Research by CBI Insights highlighted that 30% of businesses fall flat on cash while 60% of businesses don’t have proper insights on their finance or treasury workflow..

It is essential to master choosing appropriate tools for predicting cash flows for identifying a crisis in the future since it helps in making prudent decisions for limiting risks and identifying probable opportunities. To achieve that, these steps should be followed:

1. Monitoring the cash flows :- Cash inflows include profits or incomes. Outgoing cash includes expenses, payroll, and debt. The HighRadius cash forecasting software automatically rolls up forecasts for various business teams, units, and regions to help you control your cash flows.

2. Integrating with data sources:- Centralized systems like Cloud helps in seamlessly pulling the accounting data via ERP, API, or SFTP and provides the IT team to perform more value-added work than manual extraction of data.

3. Choosing a model for forecasting:- According to the purpose of the forecast for short-term or long-term, the models would identify trends in sales projections, expenses, determine patterns in customer payment behavior. HighRadius informs you where to use AI-based models or heuristic models. Cash flows like Payroll, CAPEX, Investments need heuristic models, whereas AI models are used for AR and AP due to their high variability.

4. Tracking the variance in forecasts:- Lastly, the variance is monitored and the areas facing high variances are noted. The KPIs are tracked and updated accordingly, and informed decisions are made.

But preparing a forecast with spreadsheets and then collaborating with different teams to make cohesive plans is challenging. Thus automated tools can support you through the process and help in saving time.

5 Tips to take your cash forecasting to the next level

Here are some best practices to choose the most suitable cash forecasting software:

  • Determine your cash forecasting purpose. If you need to track your day-to-day cash positions or prevent overborrowing, then you should forecast daily, but if your priority is an investment or business expansion/M&As, then you can forecast either weekly or monthly depending on your needs.
  • Ask yourself why you would need to upgrade to better technology and learn how it can help you with forecasting, what are the areas where it will provide benefits, and if it can save ample time for your team to make strategic decisions.
  • Research for a robust solution that is capable of performing end-to-end cash forecasting processes, performs accurate forecasts and offers granular visibility.
  • Evaluate if the solution will fit seamlessly with your system and if it has enough flexibility and scalability or not, to align with your KPIs even if they change in the future.
  • Analyze how quickly you can recover your investments from the chosen tool/technology and if the technology would reduce the variance in forecasts vs actuals, hence increasing your gross savings.

Forecasting software for mid-sized businesses should allow easier integration with data sources. It must predict balance by adding variability in receivables, deliver factual and reliable analytics and reports, and assist in minimizing risks, and increase workforce agility.

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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.