How do you evaluate and compare different cash flow forecasting tools or software?

Cash flow forecasting is one of the most important processes for any size business to own. There are now countless tools, from spreadsheets to high-power enterprise performance management platforms. What’s most important for effective cash flow forecasting is a balance between speed, accuracy, manual intervention, and driver-based projections. There is no one-size-fits-all approach.

Forecasting solutions are typically built with different target customers in mind. One of the biggest differences is direct vs indirect methods of forecasting. A solution like Fathom or Syft uses the indirect model - based of P&L, while a solution like Float uses the direct method which is better for shorter 13-week forecasts. You may even find you use 2 different software packages as both models serve different purposes. Ultimately you need to be able to trust the numbers - so using the software that you can understand where the numbers are coming from is really important!

In my experience as a CFO, the ability to create different scenarios and adjust variables is crucial for accurate cash flow forecasting. It allows businesses to prepare for various outcomes and make informed decisions. Integration with accounting software and bank accounts ensures real-time data, enhancing accuracy. Advanced features like AI and machine learning can automate the process, saving time and reducing human error. However, it's essential to ensure these tools are user-friendly and provide clear, understandable reports.

Cash flow forecasting software should primarily be evaluated based on the criteria specified by its target audience. The requirements and needs of an individual will slightly differ from those of a family, and are likely to vary significantly from those of a business, corporation, or investment fund. To achieve an excellent user experience, such software must be intuitive enough to allow users to view their forecasts immediately upon their first use of the tool to highlight its benefits. It should also be flexible enough to accommodate more experienced users that want to utilize advanced features and make changes to their forecasted scenarios at any given timeframe. Finally, accuracy, reliability and exceptional user support are crucial.

Cash flow forecasts should be able to update quickly and easily. Any effective cash flow forecasting software should integrate seamlessly with existing financial systems. It should also allow export capabilities to Excel for one-off analysis and modeling.

From my experience as a CFO, the ease of use and support for a cash flow forecasting tool is crucial. A user-friendly tool can save significant time and reduce errors, improving the accuracy of forecasts. Additionally, robust customer support can aid in troubleshooting and enhance the overall user experience, leading to more accurate and efficient cash flow forecasts.

In my experience as a CFO, the cost of a cash flow forecasting tool is not just about the upfront price. It's crucial to consider the long-term value it brings to the business. A tool that saves time, reduces errors, and provides accurate forecasts can significantly impact decision-making, risk management, and growth planning. It's worth investing in a tool that aligns with your business needs and offers a positive return on investment.

While reviews and reputation of a cash flow forecasting tool are important, it's also crucial to consider the tool's alignment with the specific needs of your business. A tool with high ratings but lacking in features relevant to your business won't be as beneficial as one that might have fewer reviews but is tailored to your needs. As a fractional CFO, I've seen that the best tools are those that can adapt to the unique financial dynamics of each business, helping to accurately forecast cash flow and ensure business growth.

From my experience as a fractional CFO, the compatibility and flexibility of a cash flow forecasting tool are crucial. It should not only integrate seamlessly with your existing systems but also be adaptable to your unique business needs. For instance, if you operate in multiple countries, a tool that supports various currencies and languages would be beneficial. Also, consider if the tool can scale with your business growth and allows for customization - these features are vital for accurate growth planning and maintaining healthy net margins.