Using Data Analytics and AI for Managing Business Cash Flow

On May 6, 2024

By: Victoria Kosuda, CPA, Principal
Nisivoccia Client Accounting Services and Advisory

Data analytics and artificial intelligence (AI) are transforming cash flow planning and management for businesses. With these technologies, we can access more information, quickly forecast outcomes, and make better financial decisions.

Data analytics has always been the basis of the methods used to analyze cash flow. By looking at historical cash activity, we can identify the patterns of the money coming in and going out. Metrics such as cash conversion cycle, quick ratio, and days on hand show the liquidity and operational performance of a business. These metrics can detect possible cash shortfalls before they occur, enabling businesses to adapt accordingly.

With AI now added to analytics tools, businesses can easily enable longer-range scenario planning and more accurate cash flow management. We can use these tools to determine whether our decision to hire someone new or change customer payment terms will strategically affect cash balances now and in the future. Business opportunities can be thoroughly tested before a cash investment decision is made.

AI can improve cash flow planning by using models that draw information from various sources, both internal and external. It can learn trends from past data and analyze factors like market conditions and customer behavior. AI will continue to learn from the information it gathers, make recommendations, and adjust the forecast accordingly. Businesses can also use AI and data analytics to automate cash flow management. Automated systems gather cash flow data in real time, generate immediate analyses, and notify managers when there are significant differences from the predictions.

Using data analytics and AI improves the precision of cash flow planning and management. It helps businesses keep optimal cash balances, invest wisely, and ensure stability. As technology advances, adopting these tools will be a differentiator for thriving 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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