Five Must-Haves in Cash Flow Forecasting Application

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Sufficient positive cash flows are critical to your organization’s basic solvency. How else to make rent, pay wages, and meet unforeseen obligations? To stay afloat, organizations must forecast cash flows accurately, factoring multiple sources of income and expense, and weighing the urgency and timing of strategic investments in people, equipment, and R&D against future liquidity needs. This is not simple math, nor is it best computed in spreadsheets. It really requires an enterprise-grade cash flow forecasting application. (Check out our cash flow forecasting white paper.)

Today, cloud software can deliver advanced-analytic forecasting capability that delivers advanced-analytic optimization, plus automation, collaboration and workflow features that help teams save time and improve the accuracy of cash flow and other financial forecasts. Unlike manual spreadsheet forecasting, the real-time work and reporting environment of cloud platforms unifies various stakeholder teams in a shared process. Data synchronization and automation taps real-time, or near real-time, data streams for rolling forecast and budget processes. Advanced analytics let planners what if test multiple scenarios and courses of action on the fly. All of this helps organizations respond nimbly to change, improving profitability and competitive planning. In this article, we list five key features to look for in any top-rate cash flow forecasting solution.

1. Real-time computing and reporting environment with always up-to-date forecasts

In many cases, month-old spreadsheet data doesn’t cut it. Look for a cash flow forecasting application that:

  • Pulls and analyzes data and assumptions automatically, as soon as they become available
  • Pushes changes and updates throughout the system in real time, updating all forecasts
  • Shows users the impacts on all areas of the organization as changes happen

2. One version of the truth

The best forecasts are actionable ones, but it becomes challenging to make decisions if there are multiple, competing forecasts with different underlying assumptions. Instead, have stakeholders contribute to a single forecast. Look for software that:

  • Is server or cloud-based for centralized forecasting
  • Lets multiple users work on the same forecast simultaneously without having to pass files around
  • Automatically loads the latest updates so you don’t have to manually search for the newest data sets or worry about versions

3. Complete transparency

This requires a built-in proposal-approval process and a crystal clear audit trail of all changes (and underlying reasoning) to explain the forecast. Transparency lets stakeholders see what changed, when, and by whom. It also lets them easily layer the forecast with knowledge and information not yet reflected in the historical data. All of this raises collaboration and accountability, and ultimately improves buy-in to forecasts and plans. There are also customizable, system-access levels to limit what is viewable to certain roles and to assign ownership of assumptions to specific groups or users. Make sure the software:

  • Automatically tracks, documents, and time-stamps changes
  • Lets you review old versions of any assumptions
  • Can “roll back” and load forecasts from any date and time
  • Assigns ownership of assumptions to people or groups

4. Unlimited what-if testing for scenario planning

Your organization’s stakeholders must be able to quickly and easily test competing courses of action under any combination of scenarios. Look for forecasting software that:

  • Visualizes the impact of what-if scenarios on key metrics
  • Supports drill-down reports to the line item level for a more detailed understanding
  • Can save scenarios, compare scenarios, and highlight differences in assumptions and results

5. Advanced analytics

Forecasting often involves tedious, manual sifting through huge datasets and a lot of guesswork. Instead, you should be focusing on the big picture— your cash flow. Look for software that:

  • Automates detection of trends and patterns
  • Provides a library of forecasting methods and models
  • Can automatically choose the best-fit forecasting method for your data
  • Lets you add or link to other models your organization has already developed
  • For project-based forecasting, allows automatic application of spread curves to any new project with easy-to-change parameters, like dates and durations