Treasury management can often be a complicated beast. Monumental leaps in technological capabilities have introduced a dizzying variety of crucial new treasury functions and processes in recent years, while aggressive innovations in existing areas have created an influx of dynamic new solutions to carry out those processes. That pace of change has been particularly rampant across the cash flow forecasting space.
Cash flow forecasting is a critical cog in the treasury management machine, which is why teams can’t afford to get it wrong. Forecasting cash flow enables organisations to better understand their capabilities, manage outstanding debt obligations and guide direct future investments.
On a macro level, increasing global geopolitical uncertainty is pushing an increased focus on cash forecasting
According to Conor Deegan, the managing director of forecasting solutions provider CashAnalytics, the inherent need for dynamic cash modelling tools has skyrocketed thanks to looming economic uncertainty across key global markets.
“The end of 2018 has seen, and 2019 will include, several key micro and macro factors that have brought cash forecasting to the front of mind for many CFOs,” he says.
“On a macro level, increasing global geopolitical uncertainty is pushing an increased focus on cash forecasting. Uncertainties around Brexit, the threat of trade wars and protectionist policies all mean that CFOs are keen to get a clear view on their future cash requirements.
“Add to this the record corporate debt levels that look set to continue into 2019, and you get a clear picture of why cash forecasting is such a core focus for global finance teams.”
That’s why software providers have devoted so much of their time and energy towards developing cash flow forecasting tools and CFF platforms that go well beyond simply producing subjective analyses of cash statements – and so the market is absolutely littered with various treasury software products devoted to offering quicker, more dynamic and more accessible cash flow modelling functions. Unfortunately, that healthy spirit of competition has also created a new hurdle for treasury management teams: choice.
So, what should organizations be looking for when attempting to navigate this seemingly infinite sea of cash flow forecasting solutions in 2019? Predictably, the answer to that question depends largely upon company size, activity and level of ambition.
Automation, centralization and integration
First and foremost, it’s worth bearing in mind there are several entry routes when shopping around for CFF platforms. Large organisations could opt to invest in creating their own tailor-made package using internal talent or external technology specialists – giving that business total proprietary ownership over its own bespoke solution. Yet more often than not, small and medium-sized firms tend to opt for white label cash flow forecasting systems or software as a service (SaaS) solutions that can be easily integrated with existing treasury systems.
Regardless of the entry route that you choose, treasury teams need to have an intimate understanding of their organisational requirements, wants and needs in terms of cash flow forecasting – because, as Finanscapes director James Fellows points out, sometimes going for an all-singing and all-dancing product is actually more trouble than it’s worth.
“It’s easy to make the mistake of buying the most powerful solution designed for big, heavyweight businesses, because it’ll have lots of functionality that you may need one day,” he says.
“In reality, though, it won’t be designed to suit your business, and your team will spend a long time configuring and customising, trying to create reports that would come out-of-the-box with a more appropriate solution. If you’re not careful, you’ll end up hand-crafting everything and you might as well go back to Excel.”
If you’re not careful, you’ll end up hand-crafting everything and you might as well go back to Excel
That’s why Fellows recommends managers begin their search for a CFF tool as they would for any other software solution: by coming up with an explicit list of the business outcomes that tool must deliver, and the functions it’ll subsequently need in order to get the job done.
The precise functionality a firm requires will inherently vary left or right based upon its business activity, size and goals. Legacy accounting solutions providers like Sage and Microsoft Dynamics are now placing increased emphasis on vertical specialisation in order to cater to the needs of particular industries using sector-specific forecasting models and workflow types.
That being said, firms across all industries should bear in mind several component requirements when considering any cash flow management tool.
Above all else, any cash flow system worth its salt must include automated data collection functionality capable of collating and harmonising data from a variety of sources and statements in order to condense a huge volume of figures into reliable and simple reports that treasury teams can swiftly digest and act upon.
Without the benefit of automation, firms run the risk of inadvertently excluding data from forecasts or failing to schedule it – and thanks to rapid developments in artificial intelligence and machine learning, key market players have started to roll out solutions that all but mitigate those risks.
Award-winning UK start-up Fluidly is leading the AI revolution with its cash flow forecasting software, which deploys bespoke algorithms that integrate data across company accounts to identify hidden patterns, trends and anomalies in real-time. As a result, managers benefit not only from innately detailed baseline forecasts, but also from unprompted and data-driven analysis. Better yet, because the AI system is continuously learning and adapting to source data, cash flow forecasts become more accurate over time.
In this day and age, it goes without saying centralisation is an equally critical component for any effective cash flow forecasting solution. All good cash flow modelling tools must have the ability to collate financial information from all applicable sources, data streams and corporate level departments into one central repository that all relevant teams and managers can access, understand and utilise to make informed decisions on business options, potential and trajectory.
Yet firms must also consider a forecasting solution’s ability to integrate with other systems and platforms. This requirement for integration and compatibility is particularly relevant for global organisations needing to assess the cash volumes of a number of subsidiaries – but at a more basic level, it’s equally important for small businesses relying on a range of software solutions that need to work in harmony to provide a bigger picture in terms of cash flow management.
Having the ability to seamlessly marry a dynamic cash forecasting software solution with existing treasury management systems will add value to data management streams by creating more efficient workflows in which automated cash flow functions feed into other accounting systems. In 2019, incompatible systems are an unacceptable waste of time and energy – which is why the sector’s boldest start-ups and market players are now rolling out products in which integration is a core USP.
The Scottish-based start-up Float offers a tempting cash flow forecasting app for small businesses in particular, having been designed almost exclusively for firms that operate using three of the world’s largest accounting software solutions.
The Float app offers three distinct integrated systems: one for Xero users, one for FreeAgent users and one for QuickBooks users. Each variant produces automated, granular transactional views and scenarios to track performance, and can be easily deployed alongside partner software systems at the drop of a hat. Another UK start-up, Futrli, has rolled out a similar CFF tool that focuses on providing seamless integration with popular SME accounting choices. Futrli also has the ability to connect with MYOB AccountRight.
Who’s leading the market in 2019?
At this point, it goes without saying firms are spoilt for choice when it comes to cash flow forecasting tools. Yet for those keen on exploring a solution that incorporates everything on their wish list alongside core functionality, there are some clear market leaders turning heads.
French bank and SaaS provider BNP Paribas is taking on a leading role reshaping the market thanks to a new strategic partnership with the Belgian smart treasury platform Cashforce.
Announced at the end of 2018, the partnership with Cashforce will enable BNP Paribas corporate clients to access a 100 percent digital and autonomous cross-banking system capable of providing automated cash flow forecasts, reporting and transactional analysis through one central portal. Designed to seamlessly integrate with a range of ERP systems and data streams, the platform will also benefit from an AI-based simulation engine that can run multiple cash flow scenarios, impact analyses and forecasts in real-time.
This represents a step forward for AI-powered CFF solutions in terms of integrations and scalability, removing yet another step from the equation for treasury teams looking for intricate transactional analyses and forecasts without having to move back and forth between various portals and services. BNP Paribas isn’t alone, either. Deutsche Bank is now offering clients a similar suite of cash management services that lets businesses leverage the bank’s global network and simultaneously benefit from automated forecasting capabilities.
Although hyper-integration is set to be a key trend across the cash flow forecasting market in 2019, specialist software providers like Kyriba and Serrala will continue to maintain a formidable market share through their development of treasury management systems that focus on streamlining cash management functions across divergent global markets.
Meanwhile, smaller businesses can look to rapidly growing cash flow start-ups like Fluidly or Brixx for dynamic forecasting solutions at staggeringly low service rates.
But as machine learning, further integration and ease-of-use continue to drive market momentum and create better options for consumers in 2019, there’s also no shame in pursuing professional advice surrounding the type of cash flow forecasting system best suited to meet your required organisational needs. There is now a thriving fintech consultancy sector offering input on how to select and implement various treasury management functions, led by market leaders Bellin and Strategic Treasurer.
At the end of the day, choosing the perfect cash flow forecasting solution for your business can often be a long and labour-intensive process – but it’s a process your organization absolutely must complete in order to move forward.