How Forecasting Tools Can Pull SMBs Through The Economic Storm

With more payments and back-office workflows being digitized, companies have more data than ever before with which to work.

For some finance professionals, it may seem an overwhelming task to make sense of financial data to understand where a company has been, where it is today and where it could be tomorrow. While larger enterprises have had the resources to embrace financial forecasting technologies that wield sophisticated tools to bring greater value to that data, smaller businesses have historically been shut out of the market for such financial solutions.

Even as more small businesses adopt software solutions that generate more data, rarely have financial professionals focused on extracting information out of those portals.

Rather, according to Jirav CEO and Co-founder Martin Zych, though FinTechs have done wonders to automate processes like accounts payable or transaction coding through the ingestion of information, often forgotten is the automation of data outflows from those systems into a single source of truth.

The market disruption of the pandemic has made it even more vital than ever for smaller businesses to gain the technologies and business intelligence necessary to survive. And, as Zych told PYMNTS in a recent interview, the old ways of managing finances simply won’t cut it.

“Many people create budgets for the year, and then a half of a year goes by and the world has changed,” he said, a reality that has never been more true than today. “With the pandemic, the whole world flipped upside down. And the first thing we hear when people reach out to us for help is controllers and finance professionals saying they need to create a forecast — and do it super fast.”

Overcoming App Fatigue

Today, explained Zych, smaller businesses without multimillion-dollar budgets have been forced to manually “glue” together troves of data aggregated from an array of enterprise apps.

So it may seem like a burden to convince these small and medium-sized enterprises to adopt one more software solution like Jirav, particularly as the friction of app fatigue heightens.

As a platform designed to enable these companies to centralize data and analyze it for financial management and forecasting, Jirav — which recently announced a Series A funding round — aims to potentially reduce the number of apps a business has in place. Zych noted that small- to medium-sized businesses (SMBs) struggle to access holistic platforms with all of the features they need, like data visualization and cash forecasting. The result has been mega-spreadsheets chief financial officers and other finance professionals use to piece together the bits and pieces of information to create an entire picture of company financials.

“It takes a lot of time, and it’s hard to Frankenstein together a bunch of tools,” he said, adding that CFOs need to be spending their time having strategic discussions with their teams — “versus keeping their heads down in a spreadsheet.”

Finding The Right Path

While cash flow forecasting is key to any business, SMBs in particular, which have been hit especially hard from the current market climate, must be able to think on their feet. As more companies adjust their business models (or overhaul them altogether) to remain viable and profitable within the new economic reality, forecasting capabilities will be essential.

Without them, said Zych, many small businesses may believe their only options are to lay off staff or shutter their doors.

“Build a [forecasting] model and see what happens if you get a PPP loan and keep your staff,” Zych offered as a word of advice to these businesses. “See how long it will take to ramp up your business again if things start opening off. You might be better taking a PPP loan. This has changed the mindset of a lot of people.”

The scenario is an example of the growing importance of expanding the view of company financials. This means not only answering where a company has been, where it is now, or even where it will be in the future — but understanding the steps these businesses must take to achieve their desired outcomes.

“Accounting is historically retrospective, but the real value is going beyond answering what happened, and answering why it happened, what will happen, and how they can make it happen — answering the ‘how.'” added Zych.

Though many business owners might have a pessimistic outlook, wielding data analytics technology to objectively understand the potential paths their companies can take can present new options for firms to not only survive the pandemic, but thrive through it. The small businesses that are able to act quickly as the economy begins to reopen will find themselves in the most successful position on the economic upswing, said Zych.