Not sure if your current cash management system is effective? Start by identifying the problems & understanding the challenges specific to your business.
Cash is oxygen for a business. It is needed to carry out daily business operations smoothly. To position your treasury as best-in-class, companies need to leverage the best cash management strategies to properly manage receivables, payables, inventory, idle cash, investments, etc.
Cash flow management is the process of tracking cash positions. It bolsters an enterprise to stabilize its liquidity, helps in efficient utilization of cash and assets, and maximizes profitability. CFOs, treasurers, and controllers are responsible for cash management, but sometimes the responsibility of treasury management may be outsourced to other third-party solution providers. It is essential to make provisions for unprecedented events that jeopardize your firm’s cash cycle such as bad debts, seasonalities, and economic downturns.
Whether small or large, many companies encounter cash crunches at some point in their business cycle. The most common problems encountered by companies worldwide are:
According to the 2016 survey by Atradius, 93% of businesses experience late payments from customers. So, it’s evident that Accounts Receivable can have a massively detrimental impact on cash flow. It’s always wise to adopt best and proactive practices to recover unpaid amounts. Most companies face a hurdle here because they don’t have good visibility into when late accounts may pay. Without a solution to analyze cash across regions, bank accounts, and entities, it is difficult to understand receivables and related inflows.
In order to ensure faster collection of AR, the best practices should be adopted, which include:
Many companies are unable to continuously monitor and manage excess funds due to a lack of visibility and accurate cash forecasts.
The idle cash could be used for:
Continuously managing cash inflows and outflows is equally important. Identifying the areas and the time where there is a possibility of cash surplus helps you plan ahead of time by collaborating with various teams and avoid reactive decisions that lead to overborrowing, penalties, or non-optimal business investment.
Even after implementing best practices you still might fail to control your cash efficiently due to the following reasons:
Following are few cash management techniques to tackle the above issues and become a professional at managing cash:
The future of cash management is bound to see a great transformation with emerging technologies such as AI, APIs, centralized TMS, and advanced analytics and reporting. If companies continue to implement age-old methodologies, they would be stuck at resolving trivial activities that yield less profit. With the assistance of a foolproof automation system, treasury could focus on resolving high-level issues, continuously analyze how they could improve their business operations better, be cost-effective and explore potential growth scenarios.
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The HighRadiusTM Treasury Management Applications are uniquely powered by an Artificial Intelligence technology created exclusively to redefine the forecasting and cash management processes, so that treasurers spend less manual effort but extract better outcomes such as making more accurate cash forecasts across all cash flow categories, increased forecasting frequency and variance reporting, gaining instant visibility into real-time cash positions across bank accounts at any level and achieving 99%+ straight-through reconciliation of bank statements without human intervention. The solutions are delivered via the cloud which enables them to be seamlessly integrated with multiple systems including your ERP, TMS, accounting systems, and banks instantly and simultaneously.