More than 80% of financial decision-makers feel increased corporate complexity for making it more challenging to manage cash efficiently and effectively. And in a fast-changing environment, the situation is only going to worsen.
Treasury professionals are today’s best forecasters. Accurate forecasting is critical for:
Treasurers need to assist organizations in keeping assets liquid. They can monitor liquidity by forecasting accurately in the short and long run. However, age-old processes hinder the effective management of cash.
Treasury’s primary purpose is to protect a company’s assets and manage cash resources (i.e., liquidity) to support the company’s primary business activities.
As a result, treasury has been and continues to be one of the most challenging, dynamic, and vital departments today. And the daily responsibilities of the treasury team are:
When developing forecasts, treasury professionals face four significant challenges:
The larger the organization, the more complex the financial flows. Consider a corporation that has acquired multiple companies or grown worldwide into new areas. Payment periods change across businesses, complicating the data.
A greater volume of transactions and higher-value transactions done within the company can also impact forecast accuracy. There may also be instances where cash flows are rapidly shifting or reaching a significant limit.
To ensure that forecasting results appropriately represent the anticipated cash flow, greater attention should be devoted to evolving cash flows. With all of these complexities and variables in mind, it is evident that a treasury solution can be a helpful tool in assisting treasurers in understanding and tracking data.
How to incorporate the data into the forecasting model after comprehending it? Transactions with a high volume but with a low individual impact on the business’s financial situation can be acquired from well-established data systems.
Bank feeds, A/R, ERP, and other systems that automatically transfer information to the treasury cashflow forecasting software or are extracted and manually controlled inside the treasury department are data sources.
If not handled well, other less frequent, high-value activities like tax payments, investment maturity dates, and capital costs might impact forecast accuracy. Large tax payments, for example, may simply be reported by the responsible individual. Treasury professionals must be aware of payment dates and data that must be reported.
Obtaining accurate data on time may be difficult depending on the complexity of the firm’s activities. Typically, the best data workflow method will necessitate:
Analyzing forecast accuracy by manually manipulating data on spreadsheets takes time that most treasury departments do not have. That is why treasury cashflow forecasting software is helpful for confident decision-making. Cloud treasury management enables treasurers to quickly identify differences between forecasted and actual results over a specified time through variance analysis. Any discrepancies can be evaluated and understood, resulting in a feedback loop for forecast model improvement.
The right treasury solution can manage multiple forecast models simultaneously for real-time comparison. The treasury solution enables:
Rather than being viewed as a threat, AI should be considered a tool for maximizing human potential and accelerating organizational success. By utilizing AI to its full potential in treasury solutions, businesses gain a competitive advantage by reducing operational costs, increasing productivity, and investing in growth/expansion.
Despite its growing user base, the Treasury Management System (TMS) has some drawbacks. TMS is unable to collect data from a variety of systems to improve forecast accuracy. Furthermore, an on-premise TMS necessitates ongoing corporate upgrades, lacks flexibility and scalability, and is more challenging to implement.
On the other hand, AI-powered cloud-based solutions seamlessly integrate with a wide range of data sources, including TMS, saving time and money. AI treasury solution assists treasury in meeting its objectives by:
When done correctly, data-driven forecasting yields accurate results and insights. Because inaccurate output leads to poor decision-making, ensuring that the input data is accurate is critical.
Artificial Intelligence (AI) has revolutionized our daily lives with navigation, virtual assistants, intelligent cars, music streaming, etc. It has also transformed treasury with automatic reconciliations and data consolidation, foolproof modeling, and improved scenario analysis. CFOs, treasurers, and cash managers are interested in learning more about AI’s application in finance, such as how it might improve functional operations and how to use it to fulfill future company objectives.
AI is transforming treasury in three ways:
AI’s future trajectory is expected to grow as it helps with working capital management, financing, cash forecasting, foreign currency, risk management, and other activities.
Some of the benefits that AI provides in corporate treasury include:
A $625 million construction engineering company faced these challenges:
With HighRadius’ AI-Powered Forecasting, they achieved:
Schedule a demo with our experts to learn how to make the best use of AI to forecast cash flows.
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.