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Why is cash flow reporting software a must-have for enterprise treasurers?

What you’ll learn

  • Discover the importance of treasury management for enterprises
  • Understand what to look for in a cash flow reporting software

The cash and cash equivalents, such as securities that a company generates or spends over a given timeframe, are known as cash flow. Cash on hand, also known as cash or cash equivalents (CCE), is the total cash a business can access from on-site paper bills or bank accounts and assets. Typically, business owners consider any asset that may be converted into cash in 90 days or less to be cash on hand. The more cash on hand and the lower the cash burn rate, the more room a company has to operate. And, in most cases, the higher its valuation.

Why is cash flow always a problem in a business?

Cash is the lifeblood of a business. As a result, cash flow reporting and monitoring are essential. Cash flow reporting helps treasurers understand the cash position of an organization. A company must have enough cash on hand to meet its financial expenses. It needs funds to pay its bills, bank loans, taxes, and purchase new assets.

Common pitfalls in managing cash flows

  • Lack of experience in cash management: Cash management bolsters an enterprise to stabilize its liquidity, helps in efficient utilization of cash and assets, and maximizes profitability.
  • Failure to understand the cash flow cycle: The cash flow cycle is a crucial business indicator that reflects a company’s efficiency. It monitors the rapid conversion of cash into sales and then back into cash. Failure to understand the cash flow cycle leads to a gap in assessing the cash flow situation
  • Mistaking profit for cash: Cash flow is distinct from profit because it refers to the money that goes in and out of business. In contrast, profit is the money left over after all business expenses from total revenue.
  • Bad investments: Allocating funds to projects that may not create enough ROI or cash flows to justify the investments may be a drain on the cash flow statement and, eventually, the company’s cash balance.

Importance of cash flow analysis in enterprise businesses

Cash flow analysis aims to figure out how money flows in and out of an enterprise. It helps make better decisions to support corporate operations. Treasurers require a unique view of available cash, including:

  • virtual accounts
  • regular accounts
  • assets
  • liabilities
  • historical and seasonal trends in cash flow

By combining this with knowledge in cash management, treasurers can achieve:
Importance of treasury management in enterprise businesses

  • Idle cash management: Cash management helps treasurers make the best use of idle cash to make efficient investments and acquisitions. 
  • Effective risk management: Cash management helps assess any vulnerabilities present in cash management systems that could expose enterprise businesses to risks such as theft, inefficiencies, and other preventable cash management issues.
  • Scenario planning: During crises, the CFOs demand real-time information across all business units and a level of data accuracy that can only be accomplished with cash management software.

How important are financial reports to business activities?

Treasury’s role in carrying out the capital allocation strategy refines a complete, real-time, and direct perspective with the help of treasury management systems. The ability to compare real performance to actual bank statements by using cash flow reporting software gives internal decision-makers and external stakeholders more confidence. Decision-makers can shorten cash conversion cycles and boost free cash flow or take advantage of chances to eradicate future cash flow concerns when they have straightforward and timely financial reporting.

An extensive cash flow reporting, available through treasury management system software, provides information on a company’s financial health and future performance. Business owners, managers, and executives can review such data frequently to ensure their organizations are on course to accomplish their short- and long-term financial goals and objectives.

How to choose the right financial reporting software?

Choosing the ideal cash flow reporting software for an enterprise business might be difficult. Every software has its own set of features. And the majority of them have many pricing plans that vary in terms of capability, the number of users, and other factors.

When choosing cash flow reporting software for a business, three fundamental things to keep in mind to streamline the search are:

 Pointers for choosing treasury reporting software

These are the primary things that need to be considered to ease the selection of the software:

  1. Cost: 
    1. Does the business need a low-cost, basic treasury management application or a more expensive one with additional features? 
    2. Will the software be cost-effective and provide a good ROI?
    3. Is an IT expert required to make the changes or customize the software?
    4. Is the software time-saving?
  2. Usability: 
    1. How many people will need to utilize the software? 
    2. Can the software be accessed at once by multiple users?
    3. Does the company require desktop software or a cloud-based system that treasurers can access anywhere? 
  3. Features: 
    1. How much time does it take to generate reports? 
    2. Which people are the reports sent out to? 
    3. Is the reporting process time-consuming? And would it be better to consider automation for reporting?
    These are the things to consider in features:

      1. Cloud vs. On-Premise: Most firms now use cloud-based cash flow reporting software as it has many advantages over traditional offline software.
        Some advantages of cloud software are:

        • Easy and quick implementation as there is nothing to install.
        • Online software is always up to date as vendors push all changes automatically.
        • Users can access it from any internet-enabled device at any point in time.
        • Cloud cash flow software providers take care of backup and maintenance, which is cost-saving.
        • Data across all offices are always synchronized.
        • Seamless integration with other cloud-based applications.
      2. Security: Data security is one of the most important factors to consider when looking for treasury management software.
        Things to ensure are:

        • Inquire about how the organization stores application data. Security precautions taken by the vendor to protect client data should be enquired about if they host the application on their servers.
        • Verify that these service connections are over HTTPS. The HTTPS protocol ensures that data sent from a business computer to the servers of a software provider is encrypted and unreadable by hackers.
      3. User interface & complexity: Most business owners have no accounting experience. Hence, treasury management software systems should be simple to learn for users. And, it is advisable to look for software with a primary user interface and few advanced functions. A simple interface allows users to focus on strategic activities and can help them learn faster.
      4. Scalability: Many firms purchase an application that is not scalable to their changing business needs. When their business starts to grow, the treasury management system software can no longer keep up, and the business owners must eventually transfer to another program. Data migration from an existing system to new software poses many problems for enterprise businesses. Choosing software that includes both an entry-level and a feature-rich edition is the best option for scalability. Such applications grow with the company and support it across all business requirements.
      5. Hidden costs: Some treasury management software systems suppliers may charge support and upgrades. Essential software is often offered at a lesser rate, but users must purchase ‘add-ons’ or pay a ‘maintenance fee.’ The best approach to find out if there are any hidden fees is to visit the treasury management system software provider’s pricing page. If they sell additional services, they will mention them there.
      6. Automation: Treasury teams are taking on a more strategic role inside their organizations while also being challenged to reduce overheads and deliver more value with fewer resources. According to Capgemini researchers, most corporations have already gone a long way toward fully automating various activities, and seven out of ten financial experts see the potential for full automation within the next three years.
        Automation is critical for treasury teams striving to establish strategic value at the C-level. It is designed to automate labor-intensive and highly repetitive operations such as:

        • Manual data consolidation from many sources
        • Integrating data into tools such as spreadsheets with poor accuracy
        • Cash pooling
        • Auditing
        • Performing variance analysis
      7. Other basic features: Some features to look for in a sound treasury management system are:
        • Cash management
        • Reconciliation
        • Payment management
        • Financial risk management
        • Trade finance management
        • E-Bank account management (e-BAM)
        • Analytics and cash forecasting
        • Advanced reporting & dashboards
        • Security and compliance

How does accurate reporting help businesses?

Financial reporting gives treasurers essential insights into a company’s strength and profitability. Businesses can use cash flow reporting software to determine whether their firm has enough liquidity or cash to pay its bills and forecast future cash flow, which aids in budgeting. 

The HighRadius treasury management software can help enterprise treasury by providing:

  1. Bespoke AI Models customized to business requirements and compatibility across all local and global systems.
  2. Better control & visibility of automated forecasts with auto-refinement of accuracy.
  3. Auto roll-up of forecasts from local to global levels, with detailed insights on variance analysis.
  4. Real-time global cash visibility with previous day and intraday cash positions.
  5. Automated bank statement parsing with auto-classification of bank inflows and outflows.
  6. Real-time FX translated cash positions and improved decision-making.
  7. Reports with detailed information about future trends inspire confidence in investment and borrowing decisions.

In today’s competitive business environment, there are many cash flow reporting software vendors capable of meeting the needs of any organization. When selecting treasury management software, whether SaaS, cloud-based, or custom, one must be specific because cash and liquidity are the most sensitive aspects of an organization.

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The HighRadius™ Treasury Management Applications consist of AI-powered Cash Forecasting Cloud and Cash Management Cloud designed to support treasury teams from companies of all sizes and industries. Delivered as SaaS, our solutions seamlessly integrate with multiple systems including ERPs, TMS, accounting systems, and banks using sFTP or API. They help treasuries around the world achieve end-to-end automation in their forecasting and cash management processes to deliver accurate and insightful results with lesser manual effort.