Effective ways for Treasury to optimize liquidity through accurate Accounts Receivable forecasting
Liquidity refers to how easily a business converts an asset into cash without affecting the asset’s market price. Businesses usually initiate this conversion to meet their short-term financial obligations or invest in market equities etc., that can generate more cash instantly.
Accounts Receivable is an asset that can be converted into cash in a short duration. A healthy and timely recurring cash flow from Accounts Receivable is also an indicator of how profitable a business is; which is why Treasury professionals aim to accurately predict cash from Accounts Receivable.
However, A/R is the most difficult cash flow to predict due to:
Factors That Affect A/R
Of the aforementioned factors that hamper the accuracy of an A/R cash forecast, Treasurers have limited control over the macro-economic factors & market dynamics.
The other factors such as inconsistent customer behavior, lack of visibility into A/R cash flow data & tool based limitations could be addressed if treasurers enforce the following methodologies into their forecasting process:
Most cash forecasts are 60-70% accurate, and this limited range of accuracy is attributed to inherent errors within excel and manual data gathering processes
However, regular revision of cash forecasts helps the treasurer change the assumptions regularly, re-look at the A/R data and tweak the forecast models for better forecast accuracy vis-a-vis reduction invariance.
To drive better visibility into A/R cash flows, Treasury teams should:
Gain Visibility Into All Cashflows
The Drivers of Cash Forecasting
Under the hood – how AI automates A/R cash forecasting and generates accurate forecasts
Forecast and reforecast in real-time to get accurate forecasts
Track A/R at regions, entity, company, customer and invoice levels
Predict when an invoice is going to be paid by analyzing customer payment patterns
HighRadius is a Fintech enterprise Software-as-a-Service (SaaS) company that leverages Artificial Intelligence-based Autonomous Systems to help companies automate Accounts Receivable and Treasury processes. The HighRadius® Integrated Receivables platform reduces cycle times in your order-to-cash process through automation of receivables and payments processes across credit, electronic billing and payment processing, cash application, deductions, and collections. HighRadius® Treasury Management Applications help teams achieve touchless cash management, accurate cash forecasting and seamless bank reconciliation. Powered by the Rivana™ Artificial Intelligence Engine and Freeda™ Digital Assistant for order-to-cash teams, HighRadius enables teams to leverage machine learning to predict future outcomes and automate routine labor-intensive tasks. The radiusOne™ B2B payment network allows suppliers to digitally connect with buyers, closing the loop from supplier receivable processes to buyer payable processes.
The HighRadiusTM Treasury Management Applications are a suite of the world’s first AI-powered solutions designed to support treasury teams across all industries by automating and enhancing their cash forecasting, cash management and bank reconciliation processes. The HighRadiusTM Treasury Management Applications are unique in the approach that they are powered by an Artificial Intelligence technology created exclusively to redefine the forecasting, bank reconciliation and cash management processes so that treasurers spend lesser manual effort but extract better outcomes such as making more accurate cash forecasts across all cash flow categories, increased forecasting frequency and variance reporting, gaining instant visibility into real-time cash positions across bank accounts at any level and achieving 99%+ straight-through reconciliation of bank statements without human intervention. The solutions are delivered via cloud which enables them to be seamlessly integrated with multiple systems including your ERP, TMS, accounting systems and banks instantly and simultaneously.
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.