Identify the common hurdles in cash flow forecasting and learn the tips to overcome them.
Cash flow forecasts are influenced by various factors, including economic volatility and limited historical data, which contribute to forecast variance and impede decision-making. Because prediction is always fraught with uncertainty, many businesses that lack accurate forecasting processes experience low confidence in their forecasts, particularly long-term forecasts.
The flow of money into and out of business is called cash flow.
Positive cash flow indicates that more money is entering the company than is leaving it. If a company’s cash flow is negative, it signifies that more money is leaving the company than is coming in.
Negative cash flow can make it difficult to cover expenses and keep the business afloat. As a result, cash flow may make or break a company. It’s conceivable to have a lot of sales but still run into liquidity problems and run out of money.
Increased forecast accuracy
Customer-specific variables and external components such as raw material price changes are incorporated to increase the accuracy of cash forecasts. Additionally, the AI-based software supports a closed feedback loop model that examines past and present results and adjusts projections to enhance cash forecast accuracy by up to 95%.
Make timely and accurate cash allocation decisions
Allocation of idle cash can be done effectively by using an AI cash forecasting tool. This idle cash can be invested by purchasing new products, extending or restructuring the business, acquiring another company, or pursuing foreign markets. Therefore achieving competitive advantage alongside a plan for the future.
Perform ‘what-if’ scenario assessments with ease and flexibility
By making adjustments to the forecasts, the treasurers can comprehend the extent of the impact on cash flows due to the various best-case and worst-case scenarios. This enables them to design strategies to withstand possible financial problems.
Increase confidence in real-time and data-driven decision-making
An automated cash flow forecasting solution captures real-time data automatically and stores them in a central repository for easy data access. Thus, CFOs can implement data-driven decisions by analyzing real-time cash flow visibility.
A leading construction company with 900+ projects in hand was facing challenges in its cash forecasting process:
They needed better visibility of their cash flow. They wanted to understand where the business is going in the next few months so they could plan for things like distributing to investors and reinstating payouts.
HighRadius cash flow forecasting solution provided them with the following benefits:
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