In a context of international or health-related uncertainty, cash flow is more than ever at the heart of business concerns, which reinforces the attention paid to cash flow forecasting . A key indicator for decision-making, the forecasting tool aims to estimate all of a company's cash inflows and outflows over a given period, in order to manage liquidity and investments, and to anticipate working capital and financing needs.
A true driver of a cash-centric culture, cash flow forecasting is a strategic tool for businesses. And yet, according to a study conducted by Gtreasury, " Cash Forecasting & Visibility Survey Report ," published on November 3, 2021, 48% of treasurers experience difficulties in developing their cash flow forecasts. Furthermore, the same study indicates that it is three times more difficult to generate cash positions without a Treasury Management System (TMS). Despite this finding, Excel spreadsheets remain by far the most widely used tool for financial planning, even in the largest companies. How can this phenomenon be explained?
Created in 1985, this Microsoft-published software has undergone numerous transformations, resulting in remarkable features. Easy to use, part of its power lies in its data import and manipulation capabilities, allowing users to design visually stunning reports. Finally, it's inexpensive, and many free templates are available online for managing cash flow.
And yet, these numerous advantages for calculating cash flow forecasts with Excel will never be able to hide its limitations: the recurring and permanent work of checking the data retrieved, the asynchronous internal collaboration, the non-existent traceability, the impossibility of real-time access, the relative reliability and the obligation to perfectly master Excel to detect the sources of errors and to avoid tedious configuration.
To overcome the limitations of manual processes and build confidence, the digitalization and automation of cash flow forecasting are essential, while still allowing treasurers the flexibility to adapt and update their forecasts. Solutions now exist that offer genuine satisfaction.
The first challenge facing treasurers in cash flow forecasting is collecting financial data. When is it available? How do I retrieve it? How do I easily integrate it into my forecasting tool?
An effective TMS (Treasury Management System) can answer these questions and collect all the data needed to develop an effective cash flow forecast: payments, financial transactions, transaction notifications, manually prepared cash flow budgets, and more. No more struggling to find information, waiting for files, dealing with data entry errors, or performing laborious format conversions! With an automation solution, all the data necessary for your forecasts is centralized in one place, easily visible, accessible in real time, and ready to use. Some software is flexible enough to allow you to refine your forecasts or modify them based on actual results or unforeseen financial events. You can simulate forecasts under various scenarios, apply assumptions about future trends, and even import your forecasts from a previous fiscal year.
It's not enough to simply aggregate a mass of financial data; you also need to know how to make the most of it. To analyze forecasts, automation and digitization features are often enhanced with an automatic report generator that creates customizable and easily shareable reports. These reports can be configured to evolve according to needs and unforeseen events, offering multiple analytical perspectives and graphical views thanks to the Business Intelligence functions on which they are based.
In the field of cash flow forecasting, there is increasing discussion about Machine Learning, the foundation of Artificial Intelligence, which seems destined for a bright future. While its use is still in its infancy, progress confirms that it will likely contribute to a major transformation for treasury teams, or at least for those that have adopted automation!
