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Is Projecting Cash Flow a Challenge?

Projecting cash flow is a difficult task for any treasurer. While there are a series of known costs that are considered predictable (including wages, salaries, taxes, and debts), there are also two large components of every business that are very difficult to predict, making cash flow projections extremely challenging: accounts payable and accounts receivable.

The challenge

According to a Kyriba survey, more than 70% of treasury executives involved in cash flow projections report that the tasks involved account for up to half of their time. And, 43% percent of treasurers see a lack of visibility into both current and forecasted cash flow as one of their three biggest risk factors.

With so many treasurers spending so much of their time on cash flow projections and being unsatisfied with the results, it begs the question: what are the major challenges preventing accurate cash flow projections?

Accounts payable

Though accounts payable may seem straightforward, A/P can actually be quite a challenge to predict. The A/P manager likely has a list of suppliers with known costs, however, due to delayed authorization processes within the organization or a delayed invoice from the supplier, it can be incredibly difficult to accurately project. Flexi offers a tool that to streamline accounts payable.

Accounts receivable

Simply put, customers do not always pay on time, making accounts receivable very difficult to predict. Customers may pay late, or even pay early, both of which have a major effect on estimated projections. While collectors may know which customers tend to provide late payments, this information is rarely quantified.

Managing cash flow projections

Like many accounting tasks, it should not be surprising that many finance professionals have relied on Microsoft Excel to manage their cash flow projections over the years. But, as there is always the chance of error in a manual formula-based solution like Excel, additional projection tools have been added to the market in recent years.

Suppliers of cash flow projection software caution against the use of solutions like Excel due to the amount of manipulation and oversight required to manage them. With cash flow projection software, data is gathered, stored, and compared in a secure and stable environment.

In addition to equipping staff with the proper software, organizations should also be providing adequate training.

The future of cash flow projections

While it may be difficult, it is not impossible to obtain more accurate cash flow projections. This information is increasingly important for decision makers and cloud-based software companies like Flexi make it easy to access accurate data.


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