5 Reasons to Automate Cash Forecasting in 2023

Published: January 16, 2023

If treasurers and their teams are grinding the gears on a monster cash flow model and are considering moving to an automated solution, here are five reasons to make the switch in early 2023.

1. Better manage the uncertain economic climate

Perhaps the biggest benefit of cash forecasting automation is that it enables treasurers to better predict and manage future surprises. The triple whammy of slower growth, high inflation, and rising interest rates has led to considerable uncertainty that will last for most of this year and beyond. Layer in the inevitable unknowns and we have an environment where a firm handle on cash flow is critically important.

Automation will provide the cash flow data necessary to manage the road ahead in a streamlined and reliable manner.

2. Manage an increased focus on cash

As a result of the changing economic environment and the expected impact on the cash flow of many businesses, treasurers will likely receive many more requests for cash flow reporting and insights into cash flow, including forecasts, from senior stakeholders as they too focus more on cash flow.

Automated cash forecasting and reporting will enable treasurers to respond faster and more efficiently to these new demands while significantly reducing the admin burden on the team.

3. Repay expensive debt faster

Banks have quickly passed on the recent interest rate increases by the US Federal Reserve and other central banks around the world to their corporate customers in the form of higher loan interest rates. As deposit rates have yet to see the same increase, there is a need for any company with revolving or short-term debt to use excess cash flow to keep debt levels at a minimum. If they don’t, they will suffer the pincer movement of higher borrowing costs and the reduced value of cash holdings, which will have a major impact on the profitability of the business.

Optimising cash and debt levels, with the goal of reducing interest costs while ensuring the business has enough liquidity to function day-to-day, requires a tight handle on cash and robust visibility over current and future cash flow. Without a high level of cash forecasting and reporting automation, treasurers won’t have access to reliable detailed cash flow visibility necessary to make these debt-repayment decisions with confidence.

4. Keep the team happy

The reality is no one wants to spend most of their time manually slogging away with spreadsheets daily. Cash flow spreadsheets can be some of the largest and most complex managed by any finance team due to the number of inputs and volume of data required to create meaningful cash flow forecasts.

While economic conditions have deteriorated, the labour market also remains very tight. Retention of staff remains a top priority for CFOs who understand the upfront cost and ongoing investment needed to make new hires productive and keep them happy. Investing in automation is a great way to show the team that the company is committed to both innovation and helping them to do their job, the best way they can.

5. Focus on strategic priorities

In line with the above point, automation of manual cash reporting and forecasting will enable treasurers and their teams to focus on more strategic objectives such as supporting the growth of the business and planning longer-term capital requirements.

It’s impossible to properly focus on strategic issues when weighed down by the grind of manual work. If treasurers and their teams spend 80% of their time on manual spreadsheet-based cash flow reporting and forecasting tasks and only 20% on analysis and strategic planning, this can be flipped on its head with an automated forecasting solution to instead spend most time on higher-value tasks.

Summary of automation benefits

In summary, cash forecasting automation will enable treasury teams to:

Produce cash flow forecasts, reporting and analytics much faster
Produce more accurate forecasts that improve over time
Carry out detailed drill down and analysis
Reduce manual error, improving overall forecast quality
Save time to focus on forward-looking planning

The net result of automation is that higher-quality forecasts can be produced in a fraction of the time, which will provide clearer and more reliable visibility over future cash flow.

Ready to make the change?

At CashAnalytics we specialise in helping companies transition from manual, time-consuming spreadsheet-based cash reporting and forecasting processes to a highly automated system-based approach. We are experts in cash forecasting and cash management and write extensively on the subject. The following resources may help treasurers as they consider next steps.

CashAnalytics Cash Flow Forecasting Cash Management Reporting

Article Last Updated: January 23, 2023