About Smart Driver-Based Forecasting Methods

Smart Drivers generate cash forecasts directly from transactional data, including customer and supplier transactions, as well as from payment information available in Oracle Fusion Cloud ERP. They leverage near real-time, detailed financial data to build a bottom-up view of expected cash flows.

Smart Drivers are particularly valuable for short-term cash forecasting as they are based on transactional data recorded in Oracle Cloud ERP rather than relying on high-level assumptions or historical patterns. By leveraging the most current data from the ERP system, Smart Drivers enhance accuracy and reliability, improve visibility into daily and weekly cash positions, and support Treasury and Finance teams in making faster, more informed decisions.

Primary Data Sources

Primary data sources for Smart Drivers include:

  • Oracle Fusion Cloud ERP Receivables—Cash forecasts are determined by the due dates of the invoice installment at a minimum and are aggregated for a period as Receivable Invoice and Receivable Overdue Invoice. The forecast period can also be driven by dates other than the due date, such as promise date or expected collection dates. When available, the following hierarchy is considered: promise date, followed by expected collection date, followed by the invoice due date.

    Additionally, customer payments recorded in the ERP system are available to forecast. These payments are typically recorded as actuals in the forecast but can also include advance payments for future periods.

  • Oracle Fusion Cloud ERP Payables—Cash forecasts are primarily based on invoice installment due dates and are aggregated for a period as Payables Invoices and Payables Overdue Invoices. The timing for Payables Invoices can also be influenced by available discount dates. For Payables Invoices that are past due, the system’s current date is used as the forecast date.

    Additionally, supplier payments recorded in the ERP system are incorporated into the forecast. Supplier payments are typically recorded as actuals in the forecast but can also include advance payments for future periods.

  • Oracle Fusion Cloud ERP Cash Management—Cash Inflows and Cash Outflows recorded directly in Oracle Fusion Cloud ERP Cash Management are aggregated by transaction date over a specific period and mapped to the Financing Cash Flow category within the rolling forecast grid. These transactions represent actual bank activity not recorded in subledgers such as Payables or Receivables.

    Including these external transactions from Cash Management in the forecast provides a more complete view of cash movements, improving the accuracy of cash flow projections.

Best Practices

The operational readiness of businesses in having relevant data in its most current and complete state for cash forecasting is a critical success factor. Oracle recommends that businesses identify the sequence of manual and automated processes that create, update, or process data within the Cloud ERP applications to complete the life cycle events of the underlying business entities having an impact on cash. Orchestration of processes that create invoices, make, and receive payments must be strategically timed to be ready for input to Predictive Cash Forecasting. For example, import processes for import of invoices or bank statements should be scheduled in time to bring in data ready for its inclusion in cash forecasting.

The following are the recommended process considerations for Cloud ERP sources to improve the cash forecasting outcomes:

  • Bank balances and external cash transactions
    • Regular automated import of bank statements is required for availability of the most recent bank balances to the cash forecast. Maintenance of historical statements also helps in fetching the last known closing balance on the non-availability of real- time balances. Note that cash forecasted using the last available balances can result in staleness and inaccuracy of the forecast.
    • Ensure that all external transactions are clearly identified and classified according to their specific nature. A practical approach is to define distinct transaction types for each transaction category. This allows the cash manager to efficiently analyze and dive deeper into transaction details.
    • Reconcile bank statements as soon as they are available to make bank statement and bank balances as recorded in the application to be aligned. This also helps in the cash forecasting closing balances to closely match the bank balances as per the books.
  • Receivables invoices and receipts
    • Automated billing and cash receipt processes maximizes the availability of receivable transactions along with the historical actual customer payments received for forecasting.
    • Unbilled invoices are not included in the forecasting and need to be made available as invoices billed and presented to the customers.
    • An automated and rule-based cash application process is recommended to reduce the number of unapplied, unidentified receipts and incorrect applications leading to reapplication or reversals.
    • Such frequent rebilling, un-application and reapplication of transactions to receipts and reversal of receipts leads to a varying and inaccurate cash position due to the changes.
    • A well-orchestrated collection process ensures that delinquent transactions are identified and acted upon by recording promises and expected collection dates.
  • Payables invoices and payments
    • Automated billing and matching processes ensures the availability of validated, approved, and ready-to- pay invoices for forecasting cash outflows accurately.
    • A streamlined invoice hold management process results in clean invoices without holds for accurate cash forecasting.
    • Associate an appropriate Supplier Type with your suppliers for efficient drill-down analysis and payables classification.
    • Business processes for prepayments, withholding invoice generation, and payment invoice should be orchestrated like supplier invoices.
    • Payment processes for manual and automated batch processes should be well-orchestrated to ensure availability of historical payment records for cash forecasting.
    • Apply prepayments on their corresponding standard invoices as soon as possible to avoid prepayments pending applications.