Cash is everything to a business, and cash flow forecasting makes sure there’s enough of it coming in to keep the company afloat. Disruption from debtors, unpredictable markets and unreliable suppliers can threaten the forecast, but with predictive analytics, you can create robust projections. Read on for how analytics is the tool you need to keep revenue streams flowing freely.
One important reason to adopt predictive analytics for cash flow forecasting is the intelligence it brings. Sophisticated software can drill deep down into your customer payment behaviour patterns, and dig up accurate insights based on intelligent analysis. Your credit managers can then use this knowledge for credit scoring, setting credit limits, managing risk and building strategies that maximise returns from each customer group.
Crucially, this is true for both long and short-term forecasting. Predicting the near future is easier than estimating what will happen further in time, but intelligent analytics can remove a lot of the guesswork and build a more accurate picture of what lies ahead.
If your business is facing a turbulent time financially, updating the cash flow forecast daily can help you to identify new threats in advance and take the steps you need to manage the risk. The speed of predictive analytics software allows you to make these adjustments in better time, so you can take action sooner and prevent a bad period getting much worse.
Looking past daily forecast updates, analytical software can save you time with most cash flow management activities. The traditional way to build a forecast is labour intensive, which doesn’t fit with today’s business culture where teams are expected to do more with fewer resources. Predictive analytics solves this problem by digitising and speeding up many of the tasks that are involved in planning your company’s cash requirements. This time can instead be spent fine-tuning the wider processes and strategy and identifying the causes of late payments.
When harnessed properly, predictive analytics enables us to spot meaningful patterns in past data which are used to predict future outcomes. By looking into the past you can see when problems were encountered before and decide whether a similar outcome is likely to happen again. This could be a seasonal dip in revenue or a period of the year where outgoings suddenly spike. Being aware of these destabilising events can feed your risk management and credit management strategies, which together minimise your exposure to risk and maximise cash flow. It allows you to be proactive, for example, to offer early payment incentives to boost funds at a time when you know expenses will rise.
The masses of data that you can gather about your customers, suppliers and other important areas of the business offers a huge opportunity to enhance your forecasting. Predictive analytics software creates a single centralised platform for data from multiple financial systems to be analysed and interpreted. Your team can access it remotely from anywhere and at any time of the day, speeding up processes and helping you to get more from the data you hold.
Coming up with an efficient and intelligent cash forecasting process is challenging but worthwhile. Predictive analytics could be the tool your business needs to make the task easier and the results more attractive.