Why Automating Cash Forecasting in 2023 Is Important

Using manual methods for cash forecasting has always been a long and tedious process. Along with being time-consuming, manual methods also increase the risk of costly errors that leave business owners wondering, “What is cash flow forecasting really doing for my company?”

Many of the problems businesses face with creating cash flow forecasts can be solved with automation.

Cash flow forecasting automation

photo credit: Joshua Sortino / Unsplash

Here’s why automating cash flow forecasting is important.

Data Input Takes Too Long

It’s no secret that manual data input requires a lot of time. Prior to automation, this was something that just had to be accepted as par for the course.

Automation eliminates the need for manual data input, so you can spend more on core business tasks that will help grow your business.

If you’re spending too much time on manual data input for your cash flow forecasts, it’s time to make the switch to an automated solution.

Your Forecast Is No Longer Accurate

One of the biggest issues with forecasting cash flow using spreadsheets and manual methods is that they’re not always reliable.

It’s easy to make a mistake when creating forecasts this way, and one single mistake can be very costly. Of course, errors can go unnoticed for some time, but eventually, your actuals will show that your forecasts had been off.

Errors can lead to poor decision-making that can leave your business strapped for cash.

One of the biggest benefits of cash forecasting using automated tools is that you reduce or eliminate the risk of errors. Automation allows you to create accurate and reliable forecasts so that you can make better business decisions.

These tools pull data from your accounting software to ensure accuracy. Because they use the most up-to-date information, the forecasts they produce are more reliable.

If you find that your cash flow forecasts are no longer accurate, automation can help.

Your Ability to Predict A/R And A/P Is Limited

Predicting A/R and A/P has always been notoriously tricky simply because there are so many variables that are out of your control.

  • A/R is difficult to predict because you cannot control when clients make payments.
  • A/P is difficult to predict for periods longer than 2-4 weeks because supplier costs may change, or other issues may affect payment dates.

If you’re using manual methods to create your forecasts, you will find it especially challenging and time-consuming to predict A/R and A/P.

However, automated tools can use historical data to make more reliable predictions and look at factors, such as the average time it takes for customers to make payments.

Being able to better predict your A/R and A/P can help improve your cash flow management. It will also allow you to make smart adjustments when needed to ensure you have the cash you need to maintain operations.

If you find that your ability to predict A/R and A/P is limited, then it’s time to consider automation.

Smart Automation Can Free Up More Time for Analysis

Why is cash flow forecasting important? Because it allows you to analyze data to see what changes you need to make to remain operational and profitable.

With smart automation using cash flow forecasting software, your team can spend more time on analysis.

Spending more time on analysis means that you can find out what’s working for your business, what’s not working and whether you can make certain decisions.

For example, through analysis, you can determine whether it’s a good idea to hire new staff, invest in new equipment or launch a new product. Your automated cash flow forecast may show that you have a surplus in cash that you can invest in the business.

Analyzing your cash flow data is just as important as creating forecasts. Automation will free up much-needed time that can be spent on analysis.

If you’re spending too much time on forecasting and not enough on analysis, it’s time to invest in an automated tool.

In Conclusion

In today’s world, it only makes sense to automate as many non-core tasks as you can to help your business run more efficiently. Automating cash flow forecasting will not only save you time, but it will also ensure that your forecasts are more reliable and accurate.

Your team will also have more time to analyze your cash flow data and find ways to improve your performance.

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