AI in treasury: cash forecasting and payment predictions

The role of treasury is to ensure smooth day-to-day operations and that the company meets both its short- and long-term financial obligations.

Historically, these functions relied on manual processes and the analysis of historical data. While such methods provided insights, they often led to predictions that were imperfect.

Technological advancements, however, significantly improved these processes, enabling businesses to optimise operations and reduce costs.

Yet, even these improvements fell short of what the rapidly evolving marketplace required. The rise of global competition and the increasing demand for personalised products and services pushed companies beyond mere efficiency.

Enter artificial intelligence (AI), where its transformative power is making a profound impact.

AI has streamlined and automated many previously manual processes with remarkable efficiency. It not only executes tasks with unparalleled speed and accuracy but also analyses vast data sets to identify patterns, predict trends, and facilitate informed real-time decisions.

How AI is revolutionising treasury

AI’s influence spans every aspect of our daily finance operations, and treasury is no exception. It represents one of the areas experiencing the most significant transformation, especially in cash forecasting and payment prediction.

By leveraging its ability to process enormous amounts of data in real time and adapt to evolving conditions, AI greatly surpasses traditional methods in terms of both precision and efficiency.

Where cash forecasting once relied on the manual collection of data and the analysis of historical patterns—a time-consuming and error-prone process—AI now automates the entire workflow.

Data collection and analysis happen continuously and in real time, offering treasurers instantaneous and highly accurate projections. This minimises human error and enables businesses to address potential issues before they escalate into crises.

AI also uncovers hidden patterns and trends, such as shifts in customer payment behaviour or external factors like interest rates and exchange rate fluctuations. By identifying these early signals, companies can take preemptive actions proactively.

Perhaps most notably, AI possesses the ability to learn and improve over time. With each new data point processed, its predictions become increasingly accurate, allowing businesses to adjust strategies with agility and precision.

Cash forecasting: what it is and how AI optimises it

Cash forecasting involves estimating future cash inflows and outflows over a given period. It allows companies to plan ahead, ensuring they maintain sufficient liquidity to meet obligations, invest in growth opportunities, and mitigate financial risks.

Accuracy in cash forecasting is critical, as errors can lead to liquidity shortfalls, supply chain disruptions, or an inability to meet payment commitments.

Traditionally, cash forecasting was a manual process, relying on the collection of historical data from sources such as ERP systems, bank accounts, and sales records. While effective in stable environments, this approach is labor-intensive and susceptible to human error, often resulting in inaccurate projections.

Moreover, traditional methods struggle to adapt swiftly to market changes or customer behaviour shifts, limiting a company’s ability to anticipate critical situations.

The role of AI in cash forecasting

AI transforms the cash forecasting process by automating data collection and analysis from multiple sources continuously and in real time.

This automation not only saves time but also significantly enhances the accuracy of forecasts. By analysing historical data alongside current information and external factors such as interest rates, market fluctuations, and economic trends, AI generates far more precise and detailed projections.

As a result, companies can anticipate liquidity needs with greater accuracy and react quickly to unforeseen changes in their financial environment.

Payment prediction: its importance and how to leverage AI

Payment prediction refers to the ability to forecast when and how much will be received from customers based on outstanding invoices. Maintaining a healthy cash flow hinges on how accurately a company can predict these incoming payments.

If a company cannot reliably forecast customer payments, it risks liquidity challenges that can hinder its ability to meet obligations, such as paying suppliers, employees, and covering operational expenses.

How AI enhances payment prediction

AI revolutionises payment prediction by enabling a more in-depth and detailed analysis of relevant data. AI-powered tools can process vast amounts of historical data, combining it with real-time information and external factors like market and economic changes to generate highly accurate predictions.

Using machine learning algorithms, AI can detect patterns in customer payment behaviours that would be difficult to identify manually, such as the likelihood of payment delays based on certain economic conditions or the tendency for a client to pay early or late during specific periods.

AI tools and techniques to enhance treasury functions

There are various AI-based tools and techniques that can significantly enhance the efficiency and accuracy of treasury operations.

Machine Learning

Machine learning models can analyze historical data, seasonal trends, and external factors (like market changes or economic events) to produce more accurate cash flow forecasts. These models continuously learn and adjust as new data becomes available, improving their accuracy over time.

AI-integrated treasury management platforms

Embat, as a corporate treasury management platform powered by AI, automates critical processes such as bank reconciliation, liquidity management, and cash flow forecasting, thereby minimizing human error and saving valuable time. Additionally, it offers real-time analytics and recommendations based on historical data, enabling companies to make more informed financial decisions.

Our platform integrates specific AI-driven solutions that have enhanced the accuracy of cash flow forecasts, optimised working capital, and automated key processes. One of our most innovative features is invoice payment prediction using AI, which anticipates customer and supplier payment dates based on historical behaviour patterns, facilitating more effective cash flow management.

Furthermore, by leveraging Google Cloud’s generative AI, we have automated over 90% of accounting entries, allowing finance teams to save up to 10 hours per week on operational tasks such as bank reconciliation and accounting. This automation significantly reduces the manual workload, freeing financial teams to focus on high-value strategic activities.

AI-powered chatbots and virtual assistants for financial management

AI-powered chatbots can seamlessly interact with finance teams to deliver swift and accurate insights into the current state of treasury operations. They are capable of answering queries related to transactions and providing actionable suggestions based on real-time data analysis. This integration of AI not only enhances decision-making but also streamlines treasury management, allowing teams to operate more efficiently and focus on strategic tasks.

Analytical tools for payment prediction

AI-powered tools are revolutionising payment prediction by analysing customer payment patterns and identifying behaviours that may signal delayed payments or defaults. These insights enable businesses to take preventive measures, such as sending automated reminders, renegotiating payment terms, or adjusting their collection strategies to mitigate risks.

For example, HighRadius offers AI-driven payment prediction solutions that forecast which invoices are at risk of non-payment, optimising the collection process. By leveraging these tools, companies can improve cash flow management and enhance their ability to anticipate and respond to potential payment issues.

Fraud detection systems

Some AI tools can analyze financial transactions in real time to identify suspicious or unusual patterns that could indicate fraud. These systems continuously learn from each transaction, improving their ability to detect fraud over time.

Personalised financial advisory

AI-based tools provide real-time recommendations for financial decision-making. These tools can analyze multiple cash flow scenarios and suggest optimal actions, such as the best time to invest or how to structure financing. Some tools, like SigFig, utilise AI to offer personalised financial advice by analysing the company’s financial situation and recommending investments or savings strategies.

Conclusion

AI has proven to be a game-changer in treasury management, particularly in cash forecasting and payment prediction. By leveraging advanced data analysis and predictive modelling, AI enables businesses to anticipate liquidity needs with greater precision, optimise financial planning, and manage resources more efficiently. This technology not only reduces forecasting errors but also enhances strategic decision-making, resulting in increased financial stability and business solvency.