The Business Case for Automating Cash Forecasting


Use this e-book to analyze the ROI of AI-enabled Cash Forecasting to drive better investment decisions.

Contents

Chapter 01

ROI Is Key to Making the Case for AI-Enabled Cash Forecasting

Chapter 02

Calculating ROI for Cash Forecasting

Chapter 03

Calculating Gross Savings

Chapter 04

Calculating CAPEX and OPEX

Chapter 05

Summary
Chapter 01

ROI Is Key to Making the Case for AI-Enabled Cash Forecasting


Executive management views successful projects as either making money, saving money,
or strengthening an existing initiative. Persuasive arguments for technology investments should be framed in these terms. Unfortunately, departments often attempt to convince management to fund automation projects based upon statements such as these:

  • “We are stretched thin and need better systems.”
  • “My team is frustrated because of repetitive, manual work.”
  • “It will help me focus on strategic initiatives.”

Each one of these “rationales” for bringing in an automated system carries with it an element of subjectivity which can be negated either through more objective thinking or a difference of opinion. For example, the complaint of being stretched thin will most likely be countered by a statement of “you need to do a better job of managing the workload across your department.”

CFOs Need Quantitative Metrics for Decision Making

 
CFOs are often the primary decision maker and are concerned with how to “do more with less.” This translates into two important performance indicators:reducing costs and
increasing cash flow.

Quantitive Metrics Used By CFOs for Decision Making

Chapter 02

Calculating ROI for Cash Forecasting


Calculating ROI for cash forecasting

In the following chapters, we break down each of these components and analyze how they contribute to a winning business case.

Chapter 03

Calculating Gross Savings


Calculating gross savings

Calculating OPEX Savings

To get started, benchmark your current Operational Expenditures (OPEX) and set a target goal of the savings you’ll realize with a solution.

Follow this 4-Step, Adjusted Value Stream Analysis Best Practice Process

Step 1  Identify Process Tasks
The cash forecasting process tasks vary between companies. In general, they depend on the
size of the company and the organizational structure of the finance department.

Step 2  Calculate Time Spent
Review the current process and identify how many hours per week on average your team
spends on each task. This gives you the total FTEs your team expends on forecasting cash over a given period.

Step 3  Forecast Time Savings
A Sample hourly breakdown of tasks and average hour savings with automation is shown below:

calculating gross savings 4

Step 4  Calculate Final OPEX Savings
To calculate OPEX savings multiply the hours saved per week by the loaded labor costs.

 
calculating gross savings 1

Calculating Investment Interests

With accurate cash forecasting powered by AI, companies can reduce variance significantly and earn interest by investing proactively.

How to Calculate the Interests Gained

calculating investment interest

 
calculating gross savings 2

Calculating Debt Savings

With reduced variance in forecasts, companies don’t need to borrow as much from external sources and hence, don’t have to pay interest associated with borrowing.

How to Calculate the Savings Impact on Reduced Borrowing

calculating debt savings

 
calculating gross savings 3

As per these calculations, automating cash forecasting with Artificial Intelligence can influence the bottom-line significantly.

Chapter 04

Calculating CAPEX and OPEX


Consider SaaS over On-Premise to Lower CAPEX & OPEX

calculating capex and opex

Calculating Capital Expenditure

Capital expenditure (CAPEX) is the one-time expense for implementation. It consists of hardware costs and software costs.

Hardware Costs for On-premise Projects

  • Procuring servers
  • Software licenses
  • IT resources to install, configure, and manage new hardware

Hardware Costs for SaaS Projects

  • No cost, no hardware involved, and the system operates entirely through the cloud
    (over the internet)

Software Costs for On-premise Projects

  • Upfront license costs
  • Maintenance costs
  • Cost of solution customization as per business requirement (customized forecasting models)

Software Costs for SaaS Projects

  • There are usually no up-front costs

calculating capital expenditure

Calculating Operational Expenditure

Operational expenditure (OPEX) is the ongoing costs for running a process. OPEX includes the money spent on regular maintenance of the IT infrastructure. It consists of subscription fees and IT maintenance costs.

Subscription Fees:A periodic (monthly, yearly, or seasonal) fee to gain access to the product or service. It typically includes the licence, support, and other fees.

IT Maintenance Costs for On-premise Applications

  • Update and upgrade costs for new capabilities and enhancements
  • Costs associated with delays and system downtime

IT Maintenance Costs for SaaS Applications

  • No cost, the vendor is responsible for updates and upgrades which are usually
    seamless and subject to standard service level agreements (SLAs).

calculating operational expenditure

Chapter 05

Summary


Build a Winning Business Case for AI-Powered Cash Forecasting SaaS Solution

Low Capital Expenditure with Software-as-a-Service Model

  • Additional IT hardware is never required
  • Internal resources aren’t strained as integration is relatively straightforward and requires minimal external support

Low Operational Expenditure with Zero IT Maintenance Cost

High Gross Savings Leading to Low Payback Time

  • AI-enabled forecasting frees up bandwidth of analysts to focus on liquidity planning
    versus data gathering and model creation
  • Low variance forecasts result in reduced borrowing and improved long-term investment

Get a Free Value Assessment of Your Existing Process

Visit highradius.com/treasury for free assessment

HighRadius offers you a FREE Value Assessment Service to see how automation and
increased accuracy can benefit your organization. In this analysis, HighRadius will perform a methodical evaluation of your current state (‘as-is’) across your people, process and technology.

At the end of the value assessment you will be armed with a mapped current process and
time spent, the new ‘future-state’ model and flow diagrams, a gap-analysis including
high-level requirements, and a ROI model for project implementation.

Give AI-Powered Cash Forecasting a Try

AI-powered cash forecasting

Benefits Include:

  • Higher forecasting accuracy with AI replacing spreadsheet formulas
  • Fully automated cash forecasting with daily updates
  • Accurate 1 to 12-month cash forecasts for optimized debt and investment decisions and
    accurate predictions of quarter-ending cash
Chapter 01

ROI Is Key to Making the Case for AI-Enabled Cash Forecasting


Executive management views successful projects as either making money, saving money,
or strengthening an existing initiative. Persuasive arguments for technology investments should be framed in these terms. Unfortunately, departments often attempt to convince management to fund automation projects based upon statements such as these:

  • “We are stretched thin and need better systems.”
  • “My team is frustrated because of repetitive, manual work.”
  • “It will help me focus on strategic initiatives.”

Each one of these “rationales” for bringing in an automated system carries with it an element of subjectivity which can be negated either through more objective thinking or a difference of opinion. For example, the complaint of being stretched thin will most likely be countered by a statement of “you need to do a better job of managing the workload across your department.”

CFOs Need Quantitative Metrics for Decision Making

 
CFOs are often the primary decision maker and are concerned with how to “do more with less.” This translates into two important performance indicators:reducing costs and
increasing cash flow.

Quantitive Metrics Used By CFOs for Decision Making

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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.