Cash Forecasting Treasury

The Reasons Behind the Unpredictability of Accounts Payables

An introduction to how AI can help treasurers supersede challenges surrounding accounts payable unpredictabilityn

Contents

Chapter 01

The Main Factors that Render a Cash Forecast Inaccurate

Chapter 02

The Reasons Behind the Unpredictability of Accounts Payables

Chapter 03

Handling the A/P Unpredictability and the Way Forward

Chapter 02

The Reasons Behind the Unpredictability of Accounts Payables

Along with the being limited through spreadsheets, Treasurers also have to deal with the unpredictability of accounts payables, while designing a cash forecast. And this unpredictability is owed to the following factors:

Sudden Expenses

During an accounting period, sudden expenses such as breakdowns, an increase in inventory, sudden payments may arise, which contribute significantly to variance. As remediation, treasurers are forced to set up extra cash buffers with an aim to absorb the impact of sudden expenses.

Lost Open Invoice Data

In most of the enterprise’s data associated with payables (invoice data) is stored in systems such as ERPs, CRMs, and Billing management systems. While building a forecast few of these invoices miss getting considered, which results in increased variances, costs of payments, and impact to an organization’s creditworthiness.

Increase in the COGS

Due to fluctuations in market conditions certain expenses such as labor costs, manufacturing costs, and cost of raw materials tend to increase. Which in turn affects the accuracy of the cash forecast models and increases the variance.

Errors caused at record entries

The process of raising a purchase order to issue a vendor invoice is often a manual process and creates a room for errors such as duplication of records and capturing of the wrong invoice amount. And while building a forecast, this incorrect information also gets considered; which results in an increase in the variance and cash buffers.