Cash excellence is a set of best practices that enables careful cash management. Corporates need clear visibility of where and when their cash is coming from and going to.
2021 proved to be a relatively stable economic year because it served as a transition period for businesses to re-strategize and correct some of their decisions made in 2020. However, in 2022, the primary focus will be on business scalability and revenue growth. CFOs are striving to improve their cash management strategy from cash preservation to cash excellence. While cash preservation is the technique of controlling spending, cash excellence is the development of a long-term cash culture that allows for proactive liquidity management and strategic investment opportunities.
Cash excellence aids in the stabilization of a company’s liquidity, the effective use of cash and assets for maximization of profits.
Culture of cash excellence
Here are the three pillars for developing a culture of cash excellence:
- People: A solid cash culture starts with people. CEOs and CFOs need to set the tone by prioritizing cash. Companies that manage cash well explain to employees the significance of cash not only in terms of enabling resilience during a downturn but also in terms of creating value—for instance by providing capital for future growth investment.
- Structure: Cash should be on the agenda of top management and finance leadership meetings on a regular basis, with clear accountability. To encourage behaviors that are solely focused on boosting quarterly or year-end results, leaders must establish a regular cycle and structure.
- Process: Companies must develop cash management key performance indicators (KPIs) for the entire organization, set clear goals for them, and guarantee that they are monitored by the CFO. Assigning the appropriate KPIs to the appropriate levels is crucial. For example, at the top level, KPIs like return on invested capital (ROIC), working capital as a proportion of sales, and the cash conversion cycle can be defined, while operational KPIs like percentage of overdue and early and late payments are appropriate for the front line.
Centralized cash management: The way towards cash excellence
For most enterprise businesses, managing funds across borders with many bank accounts and currencies is a difficult task. Implementing a centralized cash management system is one way to address some of the issues. Cash is handled more efficiently with centralized cash management systems due to granular cash visibility.
Here are the key benefits of centralized cash management:
- Allows you to track cash flows regularly
- Improves foreign exchange management by analyzing FX risk exposures
- Real-time cash reconciliation
- Provides a framework for decision-making
Cash flow management software: The way towards centralized cash management
Benefits of cash flow management software
- Global cash visibility: Cash management is improved by having a single dashboard view of your cash across all banks, geographies, enterprises, and currencies.
- Auto reconciliation: Transactions are reconciled automatically with rare deviations reconciled manually or automatically.
- Minimize manual errors: Manual data collection is not only time-consuming and labor-intensive, but it also leads to many errors. Leveraging cash management automation lowers errors by increasing accuracy and saves a lot of time, leading to increased employee productivity.
- Real-time view of cash position: C-suites decision-making abilities are enhanced by the capacity to acquire real-time knowledge of cash positions and create accurate forecasts.
- Ensure business continuity: Cash management automation helps to keep track of cash in transit, deposited cash, and the status of cash holdings to guarantee that a company may continue to operate in a financially sound manner.
- Seamless integration using API: Cash management automation software connects seamlessly with all banks, ERPs, and independent market data sources to process files in all formats including XML, BAI2, MT940, ISO20022, XLS, and CSV.