Complete guide to cash forecasting automation: benefits & software

The case for cash flow forecasting software

If your company isn't forecasting cash flow with precision, you're flying blind. The problem? Most businesses still rely on outdated, time-consuming methods—manual data entry, scattered spreadsheets, and juggling information from multiple systems. As your company grows, the complexity of cash operations increases, these methods become impossible to manage, and that’s when the cracks start to show. It's at this breaking point that companies finally start looking for a better way—automation.

Automation can analyze historical data and current financial trends to provide accurate and timely forecasts. Automation can predict cash flow gaps and suggest optimal times for securing financing. Automation can run multiple scenarios and simulations to show how changes in sales, expenses, or other factors will affect cash flow. If you want to take full advantage of investment opportunities or debt repayment strategies to maximize returns and minimize costs, you need to automate your cash forecasting. We’ll cover how to do that. But first, let’s take a quick look at:

What is cash flow forecasting?

To plan cash flow, you’re constantly asking questions What are our expected sales? How are our operating expenses evolving? When are our supplier payments due? Are our profit margins sustainable given everything else that’s going on? Getting a clear picture of your company’s financial health requires looking ahead, making predictions. But what if your cash flow forecast is wrong? How much risk is your business willing to take?”

Cash flow forecasting is the process of estimating the inflows and outflows of cash in a business over a set period of time. The goal is to predict when cash will be available or needed and allow the business to ensure they have enough liquidity, so that can avoid unnecessary debt, pay bills, and maintain creditworthiness. Cash flow forecasting ensures the business can meet its obligations, optimize working capital, and make strategic decisions like investments or cost-cutting, but only if the forecasts are accurate.

Cash flow forecasting methods, tools, and automation

In theory, the cash flow forecasting process is straightforward. The goal is to how much money will come in and go out over a certain period. In reality, a lot more goes into it than one might expect. In general, this is...

How to create a cash flow forecast

1. Know your business: Ask “where your money comes from?” Get on top of how much of your inflows come from sales, how much from loans, how much from investments, and where does it go (salaries, taxes, suppliers, rent, etc.).
2. Set a forecasting time frame: Decide whether you want to forecast for the short term (a week or month) or long term (a year or more). Short-term forecasts help manage day-to-day needs, while long-term ones are good for big-picture financial planning.
3. Collect cash flow data: Gather information about your expected cash inflows (like payments from customers) and outflows (like bills, payroll, and loan payments).
4. Add starting and ending cash balances: Start with your opening cash balance as the foundation for your forecast. Calculate net cash flow by subtracting total outflows from inflows. The ending balance for one period will serve as the opening balance for the next.
5. Link data sources: Connect tools like accounting software, bank feeds, customer management systems, and business platforms.
6. Include your credit options: Add any available credit options, lines of credit, overdrafts, or loans. Consider both the borrowing limits and repayment requirements, interest included.
7. Review and update: Regularly check and update your forecast. Changes in the market, customer payments, and unexpected costs can impact cash flow.

Each step of the cash forecasting process serves a purpose, some more than others. Next, let’s look at what there is to automate in cash flow forecasting.

What is cash forecasting automation?

Cash flow forecasting varies across organizations due to differences in structure, systems, and operational contexts. However, the common goal for all organizations is the same: to create reliable cash flow predictions for a set period, doing so as efficiently and accurately as possible. Cash forecasting automation refers to the use of technology to streamline the process of predicting cash flow. There are several parts of cash flow forecasting that can be automated to save time, improve accuracy, and make the process more efficient:

1. Data collection: Instead of manually gathering data from various sources (like bank accounts, accounting systems, and CRM systems), automation can pull in real-time data from these systems. This includes transaction details, customer payments, accounts payable, and bank statements.
2. Data integration: Connecting different platforms (such as ERP systems, payment gateways, and bank feeds) to bring all relevant financial data into a centralized tool automatically.
3. Cash flow calculation: Once the data is collected, automation can be set up to automatically calculate cash inflows and outflows based on predefined rules or patterns.
4. Forecasting adjustments: Automation can update the forecast based on real-time changes in data. If customer payments are delayed or unexpected expenses arise, automated tools can adjust the forecast without requiring manual intervention.
5. Scenario planning: Automation can help create different cash flow scenarios based on "what-if" assumptions. For instance, if sales fall by a certain percentage or a major customer delays payments, the system can generate alternative forecasts instantly.
6. Reporting: Generating cash flow reports can be automated to provide daily, weekly, or monthly reports without manually compiling data. Automation can also customize reports to show different cash flow metrics for different departments or time periods.

Your approach to automation should always depend on the organization’s specific context, including how forecasting is currently done, existing processes, who needs to be involved, which systems are in use, and where the relevant data is stored.

The benefits: Why automate cash flow forecasting?

As the company's operating environment becomes more complex, its ability to respond quickly can be hindered by inefficient processes. With limited resources, achieving efficiency without compromising accuracy becomes essential.

Automating cash flow forecasting offers several important benefits for companies:

• Accuracy: Manual forecasting can lead to human error, such as missing key transactions or making miscalculations.
• Process standardization: Different units often use varying forecasting methods, making it hard to access timely cash flow data. An automated, centralized system integrates all data, streamlining processes and providing easy access for analysis.
• Visibility: Manual forecasting can be too slow for sudden or ad-hoc requests. Automation enables quick, on-demand forecasts, allowing teams to respond immediately without worrying about delays. Automated cash forecasting offers clear, up-to-date views of cash flow across the organization, making it easier for stakeholders to access and understand financial data at any given time, improving transparency
• Time-saving: Cash flow forecasting can be time-consuming when done manually. Automating routine tasks such as data collection, calculation, and reporting frees up time for finance teams to focus on analysis and strategy.
• Real-time updates: Cash flow is constantly changing based on payments, expenses, and other factors. Automation provides real-time updates to cash flow forecasts, which allows companies to react quickly to changes.
• Consistency: Automation ensures that forecasts are created consistently, with the same processes and calculations applied each time, leading to more reliable projections.
• Better decision-making: By having a more accurate and up-to-date cash flow forecast, companies can make better decisions regarding cash and liquidity.
• Scalability: As businesses grow, manual cash flow forecasting becomes increasingly difficult to manage due to the higher volume of transactions. Automation scales more easily and can handle larger datasets with minimal extra effort.
• Scenario analysis: Automated systems can quickly generate different scenarios and simulate how changes in cash inflows or outflows might impact the overall cash position.
• Risk management: Automated forecasting can identify potential risks, such as cash shortfalls, earlier.
• Cost savings: While implementing an automated forecasting system might have an initial cost, in the long term, it can reduce administrative costs, streamline processes, and reduce the need for manual labor.

Let’s look at:

How to solve real-world cash forecasting challenges with automation

1. Cash position visibility: A multinational tech firm with operations across ten countries faces challenges in consolidating regional cash balances. Automating cash flow data collection into one dashboard provides a real-time, centralized view of global cash positions. This helps the treasury team manage working capital more effectively by offsetting deficits with surplus cash from other regions.
2. Delayed customer payment: Delayed payments can disrupt cash flow and supplier relationships. Automating payment tracking and forecasting based on trends provides early warnings of potential gaps. This allows businesses to take proactive steps, like negotiating better terms or securing financing in advance.
3. Unexpected expenses: A tech startup facing an unexpected server failure may quickly deplete cash reserves, making it hard to cover regular costs. Automated cash forecasting recalibrates instantly to account for unexpected expenses. It also runs variance analysis to identify similar past events, helping to simulate potential outcomes for future preparedness.
4. Expansion plans: Expanding a business requires upfront investment, which can strain cash flow if not forecasted properly. Forecast automation helps by creating accurate working capital projections and tracking available cash after daily operations. It also allows businesses to simulate the impact of opening new stores in phases versus all at once.
5. Debt refinancing: A manufacturing company with a $1 million loan due in six months needs to evaluate repayment options. Automated cash forecasting provides accurate projections of both principal and interest payments. It also tracks income deviations and runs scenario analysis to explore refinancing options, such as extending the loan term or securing lower rates.
6. Supplier negotiations: A construction company negotiating bulk discounts struggles with cash flow timing. Forecast automation analyzes accounts payable data and tracks overdue invoices to identify potential issues. Real-time updates ensure payment terms align with cash availability, allowing confident negotiations for better terms.
7. Regulatory changes: A pharmaceutical company must meet a $200,000 government regulation by year-end. Automated forecasting integrates these costs into cash flow forecasts and sets reminders for fund allocation. Scenario analysis helps decide whether to pay upfront or spread costs over time, making cash management more efficient.
8. Cash flow gaps: A seasonal apparel business experiences cash flow shortfalls every summer. Automated forecasting tracks these gaps in real-time, prompting early action. Scenario analysis helps compare strategies, such as securing a short-term credit line or cutting costs, and timely reminders ensure the finance team arranges necessary funds.
9. Project delays: A real estate developer faces a two-month project delay, pushing back $1 million in payments. Automated forecasting tracks the financial impact of delays and runs simulations to explore options like extending contractor payments or seeking bridge financing. Updated timelines are seamlessly integrated into the overall forecast.
10. Market volatility: An export business sees $100,000 less in quarterly revenue due to fluctuating exchange rates. Automated cash forecasting monitors FX rates and cash flows in transaction currencies, identifying risks. Scenario analysis helps assess hedging strategies to mitigate the impact, while real-time updates adjust forecasts to reflect ongoing fluctuations.

How to get started with cash forecast automation?

Automating cash flow forecasting can streamline processes, improve accuracy, and save time. For an automation project to be successful and delivered on time, you must consider a few crucial elements: integrations must be set up, data flows between systems require proper mapping and possible file conversions, and you need to identify the suitable data that needs to be included in forecasts. To ensure a successful implementation, it’s critical to address a few foundational aspects beforehand. Here’s what to focus on:

1. Evaluate your current cash forecasting process: Understand your existing cash flow forecasting workflow. Identify inefficiencies, data gaps, and sources of cash flow data. Automation relies on combining two main types of data:
   • Actual data: Sourced from bank accounts or ERP systems, reflecting real-time cash positions.
   • Forecasted data: Includes accounts receivable (AR), accounts payable (AP), planned revenue, recurring costs, and financing-related cash flows.

A clear understanding of these data types and their sources (e.g., treasury systems, payment hubs, spreadsheets) is essential for setting up accurate forecasts. Note that the quality of your data will directly impact the success of automation.

2. Ensure data quality: Accurate and complete data is the backbone of successful forecasting automation. Scrutinize data sources for inconsistencies or missing information and verify that your systems are capable of delivering reliable inputs for forecasting.

3. Assess system integration and compatibility: Cash forecasting automation depends on seamless integration between your cash flow forecasting software and existing financial systems like ERP platforms, payment hubs, and bank systems. Consider:
   • Connectivity options: APIs, host-to-host connections, SWIFT, or direct bank links.
   • IT workload: Selecting a provider experienced in integrations can ease the burden on your IT team.

4. Select the right forecasting models: Different forecasting models require distinct data inputs and approaches:
   • Direct forecasts: Use actual cash flow data from ERPs or bank accounts for short-term liquidity.
   • Indirect forecasts: Focus on AR and AP for longer-term financial planning.

5. Leverage historical data and seasonality: If your business has predictable cash flow patterns, historical data can significantly enhance forecast reliability. Automation tools that incorporate seasonality trends or external indices provide added insights into fluctuating cash flow scenarios.

Comparing different ways to automate your cash flow forecasting

Comparison forecasting automation methods: Summary

• Partial Automation suits smaller organizations with simple cash flow needs but struggles with scalability and accuracy.
• Semi-Automated Solutions are ideal for mid-sized setups, combining some automation with manual adjustments for flexibility.
• Fully Automated Systems are the best choice for large, complex organizations prioritizing speed, accuracy, and scalability but come with higher upfront costs and reduced granularity.

How to choose the right cash flow forecasting software?

What makes cash flow forecasting software the ‘best’ for your business? Finding the best cash flow forecasting software comes down to balancing features, ease of use, and long-term value. Here’s a simple guide to help you choose:

1. Prioritize seamless integration: The forecasting software should connect easily with your existing systems, like ERPs, bank accounts, and payment hubs. Look for options that support real-time data integration.
2. Look for advanced features: Tools like predictive analytics, scenario modeling, and real-time data updates can help you make better decisions and plan more effectively.
3. Focus on usability: The forecasting software should be easy to navigate, even for team members without a finance background. Customizable dashboards and clear reporting tools ensure everyone—from finance teams to senior management—can access actionable insights.
4. Choose customizable solutions: No two businesses are the same, so flexibility matters. Look for forecasting software that allows you to tailor workflows, dashboards, and reports to your unique needs. Modularity is a plus, as it lets you add features over time without overhauling the system.
5. Ensure scalability: As your business expands, your cash flow forecasting needs may grow more complex. Choose software that can handle increased data volume, new financial systems, and additional regions.
6. Confirm strong support: Select a provider with a proven track record for customer support and training resources. A responsive team can help you resolve issues quickly and make the most of your investment.

Key features to look for in cash flow forecasting software

• Real-time data automation: Automatically pulls data from multiple sources like ERPs, bank accounts, and payment hubs.
• Predictive analytics: Uses historical data to forecast future cash flow patterns.
• Scalable infrastructure: Accommodates growth and increasing complexity.
• Clear reporting: Provides dashboards and insights that are easy to understand and share.
• Customizability: Adapts to your specific needs and industry.

Ready to automate cash forecasting with Nomentia?

Automating cash forecasting can revolutionize how your business manages liquidity, reduces manual work, and enhances decision-making. When choosing a solution, it’s important to consider integration capabilities with your existing banks and systems, functionality, user-friendliness, and the level of support offered by the vendor.

With Nomentia, you gain more than just software—you get a flexible, customizable solution designed to grow with your business. Whether you’re a large organization managing multiple systems and banks or a smaller company with simpler needs, Nomentia can tailor its offering to suit your requirements. As a trusted partner, we even involve you in product roadmap planning to ensure the solution meets your future needs.

If you're ready to explore the benefits of automating cash forecasting for your finance or treasury team, we’d be delighted to discuss how Nomentia can help. Reach out today to take the first step toward smarter, more efficient cash flow management.