Why CFOs are using cash flow tracking software: A comprehensive guide

How has the role of a CFO changed over the years?

Companies that view the CFO function as more about reporting and less about strategy will be at a disadvantage in the near future. Finance executives must ensure that their management teams have access to timely data in order to make informed choices.

Success is driven by strategic planning and cooperation throughout the whole organization. As a result, it’s no surprise that CFO polls consistently demonstrate that trend. CFOs, particularly in small and midsize organizations, wear multiple hats. They’re reviewing cyber security concerns, managing system and data integration, solving skills gaps, and evaluating emerging technologies like Blockchain and AI, in addition to their usual CFO duties.

Challenges faced by a CFO

These are the top five challenges faced by the CFOs:

• Juggling too many responsibilities to improve a company’s financial performance, including reporting, liquidity, and return on investment
• Developing accurate financial scenarios
• Managing cash flow
• Producing timely, accurate reports
• Implementing tech for finance

What role does cash flow automation play in your company’s growth?

Treasurers should embrace automated cash flow software to keep up with business growth and complexity and become strategic advisors in the organization.

The following are some of the reasons why using the right cash flow software can help businesses grow:

• Automates time-intensive and error-prone processes
• Better data visibility leads to better budget allocation
• Enables treasury teams to detect liquidity shortages in advance

Which tools help CFOs in evolving and ensuring treasury success?

The function of the CFO is being reshaped by treasury software. CFOs are taking initial steps toward digital processes with AI and machine learning. CFOs can use digital technologies or digital tools to enable decision-making, which is dependent on data accuracy, availability, and adaptability, as well as flexible/scalable technological support.

A global survey conducted by J.P.Morgan with 130 treasury professionals states that companies are investing and enhancing their data skills to support their transformation. Data accuracy and availability are a major challenge, where nearly 60% view it as one of their two largest treasury challenges.

Why do CFOs require integrated cash flow tracking software?

The following are the reasons why CFOs require integrated cash flow tracking software:

1. Data analysis and problem-solving: The ability of a cash flow forecasting software to estimate potential short-term cash demands – such as debt obligations and payments. In this case, the software should help the organization eliminate a number of unknowns and concentrate on steering itself toward its larger business objectives. Understanding the main data that affects your organization (and the capacity to effectively analyze it) will be critical in identifying opportunities and dangers as the economy transforms in the near future.
2. Short-term cash flow forecasting: Short-term cash flow forecasting is needed to support day-to-day cash management choices and when companies need to demonstrate overall liquidity. This is especially important for companies that are subjected to quarterly bond testing by their lenders.
3. Scenario planning: Poor risk analysis makes it difficult to adequately prepare for “what-if” scenarios or to take advantage of peak seasons. An accurate analysis is difficult because there are so many unknowns to make confident decisions.

The pressure on the CFO to generate more accurate cash forecasts and leverage accurate cash flow tracking tools has never been greater due to the volatile times.

AI and machine learning tools have progressed to the point where CFOs can now deploy them to provide much-needed automation, efficiency, and accuracy to their forecasts. CFOs and their teams can use AI and machine learning to automate modeling across numerous scenarios across numerous cash flow categories.

Why do CFOs prefer AI-enabled cash forecasting software?

AI-based cash forecasting software provides the following benefits:

• Make accurate forecasts quickly and effectively.
• Automatically receive and validate bank and ERP data.
• Choose from models that are ready to use and self-serviceable.
• Share business intelligence along with cash flow forecasts.
• Evaluate forecast accuracy utilizing ‘Forecast vs Actual’ trends and reduce variance over time.
• Create and share cash flow reports timely.

Create and share cash flow reports timely.

• Ensure that the cash forecasting purpose is aligned with company goals.
• Discover and use better and more scalable technology by learning how it can help improve forecasting and save ample time to focus on strategic decisions.
• Look for a system that can handle end-to-end cash forecasting operations, provide accurate predictions, and provide granular cash flow visibility.
• Examine whether the solution integrates seamlessly with the data sources and if it has enough flexibility to align with the evolving KPIs.
• Analyze how fast the chosen tool/technology will pay for itself by evaluating the performance regularly.

Advantages of automated and accurate cash forecasting

• Improved cash flow visibility: Companies can reduce late borrowing and late payment fees by improving global cash flow visibility, and they can invest proactively for growth.
• Better risk management: Improved cash forecasting helps companies to manage risks better and understand market trends better.
• Identifying variance drivers: Treasurers can identify sources of deviation and make modifications to produce more accurate cash forecasts with improved accuracy, that will help them make better business decisions.