Best practices for improving global cash flow visibility for treasury

Whether treasurers are looking for external borrowing or optimizing ROI, the foremost step is to have a detailed knowledge of available cash. But, treasurers also require the right tools to help them forecast future cash flows and keep the right people informed. Achieving high cash flow visibility is challenging if an organization is complex in its structure and also widespread geographically. Many enterprise finance departments uphold numerous bank relationships, so they require cash flow management automation to gather and store the bank data automatically and in one place for easier data access. However, the common challenges in gaining cash flow visibility are:

• Non-standardized arrangements and transaction codes
• Timeliness of information
• Lack of SWIFT briefing in local banks

How COVID-19 has affected cash management?

Companies that handled cash wisely before the pandemic, stayed resilient during that volatile situation whereas less-prepared companies faced threats of cash crunches or bankruptcy. Since the pandemic, treasury teams have been doubling down on cash flow visibility for improving cash flow forecasting and working capital management. These functions have always been the treasury’s top priority, but getting them right throughout 2020 and 2021 has led organizations to improve their decision-making process. CFOs are using this current situation as an opportunity to concentrate on endurable cash excellence, supported by a strong cash culture in the form of a bottom-up forecasting approach. This leads enterprises to be more resilient during a volatile situation and also stay ahead of the competition.

1. Leverage centralized cash management

Centralized cash management leads to effective management of cash flows and liquidity in an organization. Leveraging centralized cash management helps enterprises to maximize returns on invested capital and also prevent the risks that can affect the company. The key benefits of centralized cash management software are as follows:

• Continuous global cash visibility
• Automate repetitive tasks
• Proactive decision making

2. Invest in cash flow management automation software

Manual workflows prevent treasurers from gaining granular visibility into their cash flow position. Many treasurers are still relying on traditional TMS, and manually downloading statements and importing the recent transactions into the TMS and ERP. Centralized cash management software connects seamlessly with all banks, ERPs, and independent market data sources to process files in all formats including BAI2, MT940, ISO20022, XLS, and CSV by:

• Faster consolidation: Auto-capturing of bank data using API and sFTP with independent market data from external sources, along with the option for the user to override or manually upload additional data as desired.
• Standardized bank details: Aggregating and consolidating bank dealings in customizable templates for all teams.
• Reduced manual work: Auto-classifying transactions based on bank, account, region, and category improves efficiency, visibility, and control. It also helps the treasury focus on strategic tasks instead of transactional tasks.

3. Netting and cash pooling

Every company’s best interest is in utilizing its cash flows efficiently. Netting and cash pooling are the two ways that enable enterprises to optimize liquidity planning and management efficiently.

Cash pooling is the short-term cash management process of consolidating liquidity within one company. Here enterprises deduct funds from cash surplus entities to provide intercompany loans to entities that are cash deficit.

Netting neutralizes pending accounts payables and receivables between two parties and consolidates them in one payment. And it also reduces settlement and any other financial risks between two or more parties.

4. Delivering insights with data analytics

Data analytics provide useful insights into areas including customer behavior, the competitive landscape, and internal processes. If data analytics are used correctly then it can drive growth strategies and also guide as to where investment is most required.

Real-time cash flow visibility supplies the financial data analytics that can help enterprises determine risk factors to enhance and enrich business processes, and determine whether an organization’s investments are concentrating on the most relevant areas.
Real-time cash flow visibility helps treasury to:

• Invest cash proactively and strategically
• Utilize cash management effectively
• Minimize debt and interest costs
• Make better-informed hedging decisions
• Predict the available future cash

Key features of HighRadius’ cash flow management automation solution

HighRadius’ cash flow management automation solution can help enterprise treasury by providing the following features:

• Continuous global cash visibility: A single dashboard view of all the cash across all banks, regions, companies, and currencies improves cash utilization.
• Automate repetitive tasks: Automated bank statement processing and reconciliation saves time, eliminates errors, and allows cash managers to focus on higher-value tasks.
• Proactive decision making: Automated global cash visibility supplies users with vital information and enough time to make better investment and funding decisions.
• Improved profitability: Informed and quicker acquisition or funding decision-making helps reduce interest expense or increase interest income.

With real-time cash flow visibility, enterprises can gain detailed insights into end-to-end transaction metrics. With tools like cash management automation, enterprises can easily get a dashboard view of all the information in a single source to make proactive business decisions. Discover how cash flow management automation helps enterprises achieve global real-time cash flow visibility by scheduling a demo with our experts.