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Have You Outgrown Your Manual Cash Forecasting Process?

Cash balance sheet

Steve Fulmer, Controller at South Mill Champs, is no stranger to using spreadsheets for cash forecasting, but he’ll be the first to tell you that it’s not an optimal method. He explains, “Excel is only as good for cash management as the information it has. Therefore, unless the spreadsheet is constantly updated with the latest data, it’s very limiting.”

Many businesses start off using this method, but as the organization grows, what wasn’t a major time and labor sink previously goes on to become just that. In fact, spreadsheets make what should be a straightforward enough task anything but that. You’re not only limiting insight into your cash position — you’re managing a lot of manual work.

First, if you have multiple bank accounts, the task of downloading your statements from each of them can be highly time-consuming. Once you have the data, you then need to load it all into your spreadsheet. Formatting all the different downloads to ensure consistency when importing may require manual tweaking and opens the door to potential errors.

Next, you’ll need to analyze the information and reconcile it. Any discrepancies need to be resolved in order to get sufficiently accurate data to work with. This can also eat up a lot of time, and you’ll probably find yourself frustrated and rushed, trying to get past this step to the real business of cash flow monitoring and reporting. This is a process ripe for error.

Cash receipts, Fulmer says, are a notable example of what can go wrong by using this method: “If you estimate your cash receipts for a week to be X dollars and you use that information to purchase a piece of equipment — and then the actual receipts come in much lower than anticipated— you might be in a bad cash position for a while.”

Spending many hours each month doing what amounts to mistake-prone, manual work takes time away from your fundamental job — the important cash analysis that contributes to the growth and success of the business. And it’s also likely that you’re not really seeing the bigger financial picture.

A Quick Quiz

If this sounds all too familiar, ask yourself these six questions.

  1. Do you constantly worry about your cash position because you don’t have sufficient insight into it?
  2. Do many different people manipulate the same spreadsheet during the reconciliation process?
  3. Are you concerned about errors in your data collection and analysis processes?
  4. Do you and your team end up spending a lot of effort tweaking data from multiple sources? Is this process becoming increasingly time-consuming?
  5. Is the thought of an audit, either internal or external, stress-inducing? Are you concerned there may be irregularities in your books or compliance issues hidden there?
  6. Are you worried about the security of your data and the risk of fraud or information theft?

If you answered yes to one or more of these, it may be time to move beyond manual cash management to an automated system. Your objective is a well-executed risk management strategy that’s informed by streamlined cash analysis reporting. However, achieving this is impeded by burdensome processes that are inefficient, time-consuming, risky and potentially inaccurate — where the prep is more time-consuming and labor intensive than the effort actually spent on the ultimate goal.

Fulmer adds that utilizing spreadsheets to do cash forecasting is particularly risky if your business doesn’t generate a lot of cash, or if it relies on incoming receipts to fund projects or expansion initiatives.

The Benefits of Automation

In future articles, we’ll discuss how to prepare your team and your processes for the changes that cash management automation brings. However, before we get there, let’s consider the basics of how automation can address your greatest concerns.

  • Improved efficiency. This one is at the top of the list for a good reason. Streamlined reconciliation processes will free up you and your team to perform more value-added work. You won’t be wasting hours manipulating data by hand.
  • More accurate forecasting. All that manual tweaking of data invariably comes at a cost to accuracy. Yet precision is exactly what you need to monitor your organization’s cash position and keep your finger on the financial pulse of the business.
  • Faster insights. Time is of the essence when you’re calculating risk and liquidity. Hours wasted formatting and organizing data instead of analyzing it puts you behind the curve.
  • Integrated information. Automation doesn’t just save time; it provides a streamlined way of aggregating data from various sources into a single report. This is particularly useful if you’re dealing with multiple bank accounts, several different ERP systems, international currencies, branch offices or subsidiary companies, and so on.
  • Enhanced compliance. Manually researching prohibited vendors is time-consuming and complex, and the sanction lists are constantly being updated. Making a bad payment can land you in hot water, resulting in costly fines. Software can do the heavy lifting here.
  • Easier audits. Data-gathering during an audit should not be a major task that takes time away from your normal business operations. Information required by auditors should easily accessible and organizable into concise and accurate reports.
  • Fraud detection. Automation can help identify payments that appear “off,” unusual movement of cash or other suspicious transactions.

In addition, once your automation solution is up and running, you may well discover that your operating costs decrease because there is so much less manual labor required to do the prep work associated with cash management reporting and analysis.

The Way Ahead: Cash Forecasting

Do these benefits sound like game-changers? If you’re still wrangling with cash management spreadsheets, it probably seems as though automation could take a substantial load off your mind, your processes and your workload — while providing greatly improved forecast data.

Fulmer poses a key question: “While Excel can work, do you really want a person spending time to update the cash forecast on a daily basis? If you’re still doing that, you’re really only forecasting for the very short term as opposed to taking the long-term view.”

While the switch to an automated solution may seem daunting, it’s likely that you’ll reach a point where you know that the alternative — staying with your manual process — is worse.

Is it time to stop sparring with spreadsheets and embrace a new way of working? Battling with an outmoded, manual cash management process and the inaccuracies and inefficiencies that come with it may no longer be worth the effort.

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Cash Management Forum by CMLI

March 18-19, 2025

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