How continuous cash forecasting can help CFOs see the future

May 9, 2022 | 4 minute read
Catherine You
Vice President, ERP Applications Development, Oracle
Marc Seewald
Vice President, EPM Product Management, Oracle
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It’s hard to see the future through the rows and columns of a spreadsheet. But lacking better cash forecasting tools, CFOs and treasurers still largely rely on spreadsheet data to develop their forward-looking views of corporate cash positions. In this era of big data, global enterprise growth, and rapid business change from global events, spreadsheet-based processes simply don’t cut it. They’re time consuming for your finance teams, and as such are mostly delivered monthly, without much room to adjust course based on cash excess or shortflows, let alone predictions.

What if that whole process could be automated and produce a real-time, single truth at your fingertips in your ERP? Constantly predicting future liquidity giving you up to a 30/60/90 day advantage compared to competitors to take action?

Spreadsheet realities: Too much data, too much work, too unreliable

Cash inflows and outflows comprise the largest components of a forecast—and that data is voluminous. Analysts must process ever more data from more stakeholders across more business units, countries, and customers. Global companies manage millions of accounts receivable and accounts payable transactions every month.

In addition, corporate data are typically scattered across multiple systems and departments. Capital expenditure or investment data, for example, may reside in financial planning and analysis systems rather than in accounting or with the treasurer’s organization. Payroll forecasting requires analyses of past data as well as hiring plans, salary budgets, and pay-period differences. Tax departments manage estimated tax payments across a mind-numbing array of municipalities, legal entities, calendars, and more.

How can CFOs modernize their cash forecasting process to keep up with the speed of modern business?

The modern machine-learning way: Speed, accuracy, explainability

Today, Oracle Cloud ERP provides advanced capabilities to managing cash and liquidity. Oracle’s vision is exciting: Predictive cash forecasting within Oracle Cloud ERP will soon help finance and treasury teams to automate cash accounting and reporting, forecasting, and liquidity management in real-time. Large volumes of internal and external financial data will be automatically aggregated and constantly feed forecast models using machine learning to predict cash positions. Machine learning algorithms enable financial planners to spot patterns and derive more accurate forecasts—both short- and mid-term— far faster than on-premises ERP systems and traditional spreadsheets. This intelligence and automation will make it possible to produce a daily view of cash positions and continuously predict future liquidity. 

While the human eye struggles to find patterns in huge volumes of data, machine learning can find variances and trends automatically, and immediately improve forecast accuracy. Oracle’s machine learning algorithms reflect our deep understanding of financial systems and cash forecasting gleaned over thousands of implementations. The algorithms build on this knowledge, while analyzing each customer’s unique financial data to identify patterns and derive cash-influencing insights.

Oracle Cloud Applications use multiple methods to deliver “explainable” machine learning so that finance teams can trust the outputs of the models. Jennifer Toomey, vice president of Oracle EPM Product Marketing, says, “When people create a forecast, they can explain how they came to their conclusions and finance leaders can gain a sense of forecast reliability. Explainability brings the same concept to machine learning-derived forecasts.”

Not just insights, but actions to change outcomes

Many forecasting systems are disconnected from the operational ERP systems that companies use to act to change the business outcomes. With predictive cash forecasting coming soon to Oracle Cloud ERP, the forecast data can flow directly to suggested actions for business and finance, in the context of specific cash and investment goals. So, for example, a company could modify customer or supplier payment strategy in real-time to mitigate shortfall, or shift cash from one entity to another without external borrowing. A company could also put excess cash to work in multiple dimensions: M&A, stock buybacks, carbon credits, or early supplier discounts to strengthen the supply chain. Finance leaders can adjust and prepare cash actions to ensure the right amount of cash is at the right place at the right time.

It’s time to make the move

Predictive cash forecasting offers both tactical and strategic benefits, helping companies:

  • Optimize cash profiles. Companies can make cash work for them all the time, giving them the confidence to make the best operational, investment, financing, and liquidity decisions.
  • Optimize finance talents. Automation lets companies attract and retain top finance and treasury employees freeing them to focus on more impactful and strategic work.
  • Optimize corporate strategy. With forward-looking cloud tools, financial teams can help their companies deploy cash where required, structure mid-to-longer-term investments, have sophisticated business entity analysis to prepare for the future.

With predictive cash forecasting capabilities at their disposal, CFOs can quickly and accurately develop end-to-end views of cash positions to better project liquidity, optimize resources, and plan for growth.

Learn more about the future of cash forecasting in our innovation guide.

Catherine You

Vice President, ERP Applications Development, Oracle

Marc Seewald

Vice President, EPM Product Management, Oracle


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