As a business owner I know there’s one thing that can make or break my business: cash flow. If you start a brick and mortar store with employees you may be aware of how crucial it is to know when cash is going in and out — but maybe less so if you run an online business or are a consultant.
At the end of the day I’m a writer — not a numbers person — so the more I can outsource the financial side of my business, the better off we all are. One particular use case I’ve found interesting is how businesses (like me!) can use AI to improve the accuracy and ease of cash flow forecasting.
Given that 80% of small businesses go under due to cash flow problems, getting this right is crucial. And better cash flow = getting to continue doing the work that I love.
To learn more about the tech’s potential, I spoke to several experts across various industries (from finance to ecommerce) to see how they are integrating AI into their forecasting methods and what tips you can learn from their experience.
Table of Contents
- Why Use AI for Cash Flow Forecasting?
- How AI Changes Cash Flow Forecasting: The Old Way vs. The New Way
- How AI Can Improve Cash Flow Forecasting
- Implementation Guide: Tips for Using AI in Cash Flow Forecasting
- Tools for AI Cash Flow Forecasting
Why Use AI for Cash Flow Forecasting?
You probably already know that AI can save you time and money running your business — but how exactly can it help you better forecast your cash flow?
To answer this, I should first explain what cash flow forecasting is and some common challenges you might face using traditional methods.
- Cash flow forecasting: The process of estimating future cash inflows and outflows to predict your business's financial position over time. This includes things like revenue streams, payroll costs, and day-to-day operational spending.
- Why it matters: This helps businesses make informed decisions about investments, expenses, and growth opportunities while ensuring they maintain adequate cash reserves.
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How AI Changes Cash Flow Forecasting: The Old Way vs. The New Way
Back in time before AI, cash flow forecasting meant gathering data from different systems, updating spreadsheets, and making educated guesses about when customers might pay. It’s manual, time-consuming, and often inaccurate.
Manual forecasting suffered from siloed data, outdated information, calculation errors, and missed seasonal patterns. Teams wasted hours on basic analysis that was outdated before it was complete.
Now, imagine having a system that automatically pulls data from all your sources, learns your customers‘ payment patterns, and alerts you to potential cash shortages before they happen. That’s what AI brings to the table.
While traditional forecasting might tell you to expect $100,000 in payments next month based on historical averages, AI can tell you things like:
- Company A always pays early when they order more than $50,000.
- Company B typically pays late during summer months.
- Your retail sales are likely to spike between 10 AM and 2 PM two days after Social Security payments hit. (Yes, that’s a real data point a source shared with me!)
P.S. If you’re looking to brush up on your forecasting skills, I recommend checking out these free courses in HubSpot Academy: Forecasting and Analytics in Sales Hub and Hubspot Sales Forecasting.
How AI Can Improve Cash Flow Forecasting
AI improves the accuracy and speed of cash flow forecasting.
Traditional cash flow forecasting can be tedious and error-prone, but AI is solving this problem.
“AI reduces the time spent collecting and entering data, and it can create more accurate forecasts by taking into account unexpected events and current economic conditions, which can be difficult to capture through traditional forecasting," explains Jim Pendergast, General Manager of altLINE.
AI excels at identifying complex patterns that humans might miss.
The power of AI lies in its ability to uncover hidden patterns in financial data that might escape human eyes. (And why spend your time poring over detailed spreadsheets if you don’t have to?)
Alex Schlesinger, Founder and CEO of Active Mutual, a final expense insurance business, shares a compelling example. His team noticed that many of their senior clients would receive their Social Security payments on the third Wednesday of each month. “In the past, we’d roughly estimate that ‘yeah business might pick up around then.’
“Our model picked up that not only do sales increase two days after Social Security payments, but specifically, they spike between 10 AM and 2 PM on those days,” Schlesinger explained.
“That kind of accuracy means we can plan everything better — from marketing budgets to commission payouts,” Schlesinger added. “Plus it's way cheaper than it used to be.”
Free Financial Planning Templates
Manage your business and personal finances with these five financial planning templates.
- Balance Sheet Template
- Profit & Loss Statement Template
- Financial Projection Template
- And More!
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AI integrates multiple data sources for comprehensive forecasting.
Modern businesses generate vast amounts of data across various systems and departments. AI's ability to synthesize these diverse data streams sets it apart in cash flow forecasting.
Craig J. Lewis, Founder and CEO of Gig Wage, emphasizes that “AI has introduced predictive algorithms that significantly enhance both the speed and accuracy of cash flow forecasting by processing large datasets in real-time.”
Here are some data sources that can be integrated by AI:
- Sales and revenue data.
- Accounts receivable aging.
- Supplier payment terms.
- Inventory levels.
- Market trends.
- Economic indicators.
- Weather patterns (for seasonal businesses).
- Social media sentiment.
- Competitor activities.
Roy Benesh, CTO of eSIMple, contrasts this with traditional methods: “When we use traditional forecasting, it depends on past data and people's judgments collected over time, but AI pulls in different data from many sources like supply chain changes and market trends that provide optimized answers now.”
Benesh shared with me examples of what that looks like for two different industries. Take manufacturing as an example. With AI, you can pull in real-time data from supply chains, inventory, and revenue streams to get a clearer financial picture. Retail companies, who rely on maintaining an accurate level of inventory, can also rely on this real-time data to keep updated predictions.
Check out HubSpot’s Forecasting Software.
Implementation Guide: Tips for Using AI in Cash Flow Forecasting
Testing out AI doesn’t have to be overwhelming. I‘ve talked with several business owners who’ve successfully made the transition, and they all share a common approach: start small, stay focused, and build gradually.
1. Start with small pilot projects before scaling.
Don't try to revolutionize your entire financial system overnight. Pick one area — maybe customer payment predictions — and start there.
Lewis from Gig Wage recommends you “pinpoint the areas where you think optimization is needed and work with AI in those areas to see how you like the results.”
Begin with one specific project ➡️set clear success metrics.
Maybe you want to reduce the time spent on forecasting by 50% or improve accuracy by 25%. Having these concrete goals will help you measure progress and build confidence in the system.
2. Maintain human oversight and expertise alongside AI tools.
AI shouldn't be something you solely depend on. As Benesh explained to me, “Human oversight and frequent checks against actual cash flow data are still key to staying accurate.”
“There's a myth that this approach ‘just works’ on its own, but it needs regular attention, especially in unpredictable markets,” he added.
Lewis echoes this advice, “If the present looks like the past, then AI will do a strong job in minimizing forecasting errors. This is broadly useful because during these periods AI will outperform humans. If there is a significant deviation from the data on which the model is trained, the model will mismanage cash. I think it’s important to know what a computer is good at and what humans are good at so that you mitigate risk to the highest extent possible.”
3. Blend with traditional methods.
“Traditional methods, though slower, allow seasoned analysts to apply judgment and context that algorithms alone may miss — there is still somewhat of a tradeoff,” adds Lewis.
I like thinking of it like having both a GPS and a local guide. The GPS (AI) provides precise, data-driven directions, but the local guide (human expertise) knows about the road construction that started yesterday. You need both for the best results.
4. Start small — and focus on quality over quantity.
Lewis’s last bit of advice? “Be incremental. Pinpoint the areas where you think optimization is needed and work with AI in those areas to see how you like the results. This simplifies the transition and allows people to adapt to the new tools. AI is fundamentally a tool that helps with optimization. I think it would be much harder to implement from the get-go.”
Free Financial Planning Templates
Manage your business and personal finances with these five financial planning templates.
- Balance Sheet Template
- Profit & Loss Statement Template
- Financial Projection Template
- And More!
Download Free
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Tools for AI Cash Flow Forecasting
1. HighRadius
What is it? HighRadius offers a cash flow forecasting software that’s powered by AI and has a 95% forecast accuracy rate. This tool is designed to optimize liquidity management by leveraging AI to provide deep insights into cash inflows and outflows.
Key Features
- Automated data gathering that consolidates cash flow data from multiple sources, reducing the need for manual data entry.
- Predictive insights that use machine learning to analyze historical data and create highly accurate cash flow predictions.
- Scenario modeling that allows businesses to simulate different cash flow scenarios to prepare for possible market fluctuations.
Best for: Mid-sized to large enterprises with complex cash flow needs, looking for high accuracy in their cash flow predictions and real-time updates.
2. Oracle Cloud EPM
What is it? Oracle Cloud Enterprise Performance Management (EPM) Platform is a suite of cloud-based financial software tools that helps businesses manage their planning, budgeting, forecasting, and reporting processes. It integrates with other Oracle financial tools, making it a great option for managing your overall financial performance.
Key Features
- AI and machine learning integration that enhances forecasting by incorporating trends, seasonal patterns, and anomalies into cash flow predictions.
- Comprehensive financial planning that enables businesses to manage budgets, planning, and forecasts in one unified platform.
- Real-time data integration that pulls data from various departments for a unified view of cash flow and financial health.
Best for: Large enterprises that already use Oracle products.
3. Kyriba
What is it? Kyriba is a cloud-based cash management platform focused on improving cash visibility and liquidity management. Its AI cash flow forecasting feature helps businesses predict and control their cash flow needs.
Key Features
- Real-time cash flow tracking that provides a detailed, real-time view of cash positions across multiple accounts and currencies.
- AI-driven scenario analysis that allows companies to simulate different financial scenarios to assess potential impacts on liquidity.
- Multi-currency support. I think this is ideal for global businesses with cash flow needs across different currencies.
Best for: Multinational corporations or businesses with high-volume cash flow activity across multiple currencies and accounts.
4. Planful
What is it? Planful is a financial planning and analysis platform that incorporates AI-based anomaly detection and predictive forecasting to aid cash flow forecasting. I found that the platform is quite easy to use and that it integrates well with other financial tools.
Key Features
- Anomaly detection that identifies unexpected changes in cash flow data, helping companies address discrepancies early.
- Predictive forecasting that uses AI to analyze past cash flow patterns and forecast future cash needs.
- Collaboration tools that facilitate cross-department collaboration for more accurate cash flow planning.
Best for: Planful is ideal for small to mid-sized businesses that require a flexible, user-friendly platform for financial planning, especially if you’re looking for collaboration features.
Use AI to Increase Your Cash and Focus on Your Business
I had a harder time finding AI cash flow tools that were designed for smaller businesses. But given the complexities of cash flow (and more $$) for enterprise businesses, it makes sense. I’m sure that financial companies will still continue to experiment with ways they can integrate AI into their offerings.
But I’ve walked away with some helpful ideas about how I can incorporate AI into my cash flow forecasting process — and I’d like to run an experiment looking at the past 12 months and see if ChatGPT can find any trends that might be helpful for me as I’m planning the upcoming year.
If you're interested in testing some tools, remember the expert advice I shared: start small, maintain human oversight, and focus on one specific area where AI can help your cash flow forecasting.
After all, better cash flow predictions mean more time doing what you love and less time worrying about whether you can make payroll next month. (A win-win!)
Free Financial Planning Templates
Manage your business and personal finances with these five financial planning templates.
- Balance Sheet Template
- Profit & Loss Statement Template
- Financial Projection Template
- And More!
Download Free
All fields are required.
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