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May 6, 2024
By: Victoria Kosuda, CPA, Director
Client accounting services and advice Nisivoccia
Data analytics and artificial intelligence (AI) are transforming business cash flow planning and management. With these technologies, we can access more information, quickly predict outcomes, and make better financial decisions.
Data analysis has always been the basis of the methods used to analyze cash flow. By examining historical liquidity activity, we can identify patterns of money coming in and going out. Metrics such as cash conversion cycle, quick ratio, and days available show a company’s liquidity and operational performance. These measures can detect potential cash flow shortfalls before they arise, allowing businesses to adjust accordingly.
With AI now added to analytics tools, businesses can easily enable longer-term scenario planning and more accurate cash flow management. We can use these tools to determine whether our decision to hire someone or change customer payment terms will strategically affect current and future cash balances. Business opportunities can be thoroughly tested before a cash investment decision is made.
AI can improve cash flow planning by using models that pull information from a variety of sources, both internal and external. It can learn trends from past data and analyze factors such as market conditions and customer behavior. The AI will continue to learn from the information it collects, make recommendations, and adjust forecasts accordingly. Businesses can also use AI and data analytics to automate cash flow management. Automated systems collect cash flow data in real time, generate immediate analyses, and alert managers when there are significant deviations from forecasts.
The use of data analytics and AI improves the accuracy of cash flow planning and management. It helps businesses maintain optimal cash balances, invest wisely and ensure stability. As technology advances, adopting these tools will be a differentiator for successful businesses.
Disclaimer: Sponsored content articles do not reflect the opinions of New Jersey Business Magazine or the New Jersey Business & Industry Association.
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