Predictive Analytics is all about usage of Statistical models, machine learning techniques and historical data to identify possible outcome of events. Patterns in historical data are analyzed to identify Variables/Predictors which had controlled the outcome of events in the past and these variables are used to predict the outcome of future events. As the diagram shows, while Diagnostic analytics illustrates why certain outcome has happened, Predictive analytics helps the user predict ‘what will happen in future’

Predicting the Sales and Cash Flow of an Organization

ERP as Source of Data for Prediction/Forecasting

Industries such as Retail, Financial Services, Oil and Gas, Technology etc. have embraced predictive analytics because it provides valuable insights regarding future Customer Acquisition, Spend, Revenue, Profit etc., The ERP system which is the ‘Operating System’ of these organizations, stores data pertaining to all the business processes of the organization and this data acts as rich data source for analysis. This analysis ranges from operational in nature such as Actual vs. Budget spend analysis, Sales by Product Group, Customer Acquisition analysis by Region etc., to predictive such as Spend Forecast by Purchase Organizations, Predicting Sales of certain product group in a certain geographical area, predicting next month cash flow based on customer’s past payment pattern and Overdue of receivables for next quarter etc.

Sales and Cash Flow

Let us take a look at two of the many crucial functions in an organization. The first one is Sales and the second is Receivables.

Sales is the most important department or business function in any organization and it has the biggest impact on not only the organization’s cash flow but Hiring, Budgeting, Operations, Maintenance and so on. Since Sales impacts almost all the departments in the organization, being able to predict/forecast future Sales will enable the management team to achieve that goal by empowering its departments.

Accounts receivable refers to the money a Company is entitled to receive because it has provided goods and/or services to its customers. Tracking those invoices which are not yet paid, demanding payments from those customers, further tracking the Overdue invoices, and handling of disputes etc., are arduous activities. Visibility of customers who might default payments and have to be handled by Collections department is also a challenging requirement. An organization that can predict a few of these (if not all) KPIs will not only have great insight into future cash flow but also can handle Accounts Payables effectively.

Predicting Sales and Cash Flow

Easily said than done, right? Visual BI can help you here.

Visual BI Predictive Sales Analytics solution enables organizations to forecast future sales against a plethora of dimensions such as Sales Region, Sales Manager, Business Unit, Product Group, Marketing Channels etc. This forecast enables the organization to identify its strongest and weakest areas and appropriately align its efforts.

Business Benefits:

  1. Prediction of Sales enable organizations to strategize their Budgets, Operations, AP, AR and activities of various other departments.
  2. Alignment of Sales Organization to meet the corporate goals and efficient utilization of Sales Team.
  3. Prediction of Sales and proper utilization of resources in the organization, provides an edge over the competition.

Visual BI Predictive Cash Flow application built using the predictive models on HANA solves this problem by predicting the payment date of receivables so that the company has visibility of the future cash flow. Cash flow is predicted with Daily and Invoice level of granularity.

Business Benefits:

  1. Predicts future cash flow so that the organization can plan their Operations effectively
  2. Prediction of late payment customers and invoices enables the organization to speed up the collection process
  3. Prediction of payments by future age buckets helps organizations handle their Accounts Payables appropriately

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