AR Intelligence—Payment Forecasting

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Welcome to this series of instructional articles on BlackLine’s AR Intelligence platform. We’ll show you how to raise the bar and empower AR finance teams to unlock their own decision intelligence on a global scale.

Purpose of the Payment Forecasting Dashboard

Payment forecasting is a trend analysis of learned customer behavior, looking at how your customers are paying and the predictability of their payment patterns.

From the matching process in the BlackLine Cash Application solution, we can build a picture of how your customers are paying for sales invoices raised on their customer account. This is used to forecast the value of payments that can be predicted over a six-week period.

Why Is Payment Forecasting Important?

Cash flow forecasting has become more important to businesses in recent years for two key reasons.

  1. To ensure that sufficient working capital is available to meet operational needs

  2. For pooling, which means optimizing free cash that is available in different parts of the business and using it to meet working capital requirements rather than using external funding

How It Works—Overview of the Dashboard

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Using the data captured from the Cash Application module, AR Intelligence can build a picture of how your customers are paying you, apply it to debt outstanding, and forecast future payments based on this predictability.

The dashboards break the debt down by the debt that is able or not able to be forecasted. This will provide an indication of how reliable a future forecast is likely to be as well as what is not in the forecast.

The solution then measures the success (accuracy) of previous forecasts and provides some detail on what occurred or why the forecast changed. Here is some of the reporting functionality:

  • Forecast value of all predicted invoices versus what is not predictable

  • For payment analysis—how accurate was the forecast
    - Early: payments received before they were forecasted
    - Unpaid: forecasted payments that have not been made
    - As forecast: payments made in the week they were forecasted
    - Late: payments made after the week they were forecasted

  • Overall Variance

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Who Will Find Payment Forecasting Valuable?

These dashboards will be highly beneficial to finance and credit teams. But the real winner of these dashboards will be the treasury team, who can review the predictability of the debt outstanding on the sales ledger, the levels of cash being forecasted, and the success rate.

The credit collections team can view which customers are not predictable and analyze if a different collection strategy might be worthwhile to see if this can positively influence the collection of monies on a regular basis.

Use Payment Forecasting to Make Data Driven Decisions

The data provided by these dashboards will be of great benefit when making decisions around working capital requirements and cash flow forecasting.

While there is no single silver bullet, this information will offer treasury new reporting that will provide analysis to help make more informed decisions, without the need for time consuming and limited Excel based reports from the AR team.

Get your copy of the exclusive white paper New Questions to Gain New Intelligence in Accounts Receivable to discover the questions that can challenge your assumptions and help improve your outcomes, objectives, and critical results.