Read this ebook to understand how mid-market companies can use cash flow management tools to improve their liquidity.
A corporation can access cash when and where it is required to meet its short-term financial obligations through various strategies, procedures, and tools known as liquidity management.
Ineffective liquidity structures can prevent corporate treasurers from achieving optimal liquidity management domestically and across currencies and borders in this uncertain yet competitive market environment. Inefficiencies, at a minimum, result in additional borrowing, additional transactional costs, and higher-than-necessary expenses, which can be avoided with the use of cash flow management tools.
According to a recent IDC poll of more than 800 corporate finance professionals and practitioners, more firms must implement a cohesive and “unified” liquidity management plan using cash flow management tools. The poll was designed to investigate the growing importance that treasurers and other finance professionals place on liquidity management during times of crisis and to capitalize on chances for growth. The study results emphasize the importance of CFOs, treasurers, and other financial professionals developing and implementing strategic efforts to manage liquidity holistically.
According to the survey, the following are the major concerns for treasurers and other financial leaders that are driving this heightened urgency for effective liquidity management:
Early in the pandemic, treasury leaders were compelled to update liquidity forecasts more frequently due to business closures, staffing issues, risks relating to customers’ payment timing and solvency, and other uncertainties. Although markets began to improve, supply-chain issues increased many companies’ cash needs.
To accomplish this effectively, treasurers should develop an integrated, highly automated process incorporating data from different business stakeholder groups, such as supply chain and FP&A [financial planning and analysis]. They also need to have a clear understanding of the cash flow drivers.
Corporate revolvers exist to provide needed operating liquidity during times of market or liquidity stress. Every company that does not have excess cash or capital on its balance sheet should have a revolver to bridge the gap during extreme market stress.
Rising interest rates are just one of several factors influencing liquidity management strategies right now. Treasurers must run and plan for multiple scenarios to adapt quickly to changing markets. Furthermore, treasurers must focus on what is most important rather than getting hung up on details that may or may not have a material impact.
Adopting an automated physical pooling structure with the help of cash flow management software gives a consolidated view of a corporation’s cash position. This automatic cash movement helps:
An automated notional pooling structure also reduces the company’s borrowing costs (and thus total borrowing needs) and aids in the management of cyclical cash flow fluctuations and variations in cash balances and requirements.
When developing effective cash flow management strategies, ensure that you have answers to the following questions:
These are the following tips on how mid-markets can improve liquidity:
Here are the benefits for which mid-markets should leverage cash flow management software:
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