The upcoming years will teach treasury and finance professionals many things, the most important of which is the fundamental requirement of having fast access to real-time cash and liquidity data. It is now appropriate to raise the following critical question:
Previously, treasurers commonly used inefficient static dashboards/excel spreadsheets to assemble their cash flow positions – stitching together massive amounts of data from multiple sources. And that resulted in cluttered cash visibility. These tools could only study historical/current cash trends and could not perform advanced analytics or identify anomalies or variances in real-time. Unsurprisingly, it was a labor-intensive and error-prone process that completely hindered real-time cash positioning.
The actual value of a cash flow dashboard shines through in volatile situations. Cash and liquidity dashboards display real-time data from the cash flow forecasting system. Furthermore, they direct all attention to a single version of the truth that is simple to understand and digest.
Dashboards can also be rolled into reports and delivered to senior management, providing them with a high-level view or drill down to the most granular level of detail.
KPIs differ from business to business. However, the right cash flow forecasting system offers several benefits to multinational corporations worldwide.
The five metrics listed below typically take center stage on cashflow forecasting software dashboards:
A cash walkthrough enables businesses to visualize the steps between an opening cash balance and a closing cash balance. The journey is divided into stages that show how the net cash balance has changed positively or negatively.
Headline cash inflow categories, such as customer receipts and investing inflow, can be color-coded on a graph to visualize the relevant information. The primary cash outflows, such as supplier payments or taxes, should also be accounted for.
The primary advantage of visualizing data is highlighting each cash flow category’s impact on the cash balance. A treasurer or financial planner, for example, could immediately see whether supplier payments have negated the combined contribution of customer receipts, investing inflow, and dividend receipts using a cash walkthrough graph.
Large businesses, particularly those with a global presence, frequently struggle to maintain an up-to-date, single-currency centralized cash position that shows current and forecasts cash levels at various points in the future.
This is entirely understandable given the number of subsidiaries and bank accounts involved. However, because bank data is fed directly into the dashboards, a real-time view of daily consolidated cash positions is easily available.
Most large corporations have multiple external liquidity sources spread throughout their operations. Treasury cash flow forecasting dashboards must show actual and forecasted liquidity. This serves as the foundation for accurate cash reporting and decision-making.
While not strictly cash and liquidity metrics, net debt and covenant metrics are inextricably linked to cash and liquidity and are far too important to overlook. Cash and drawn liquidity are critical components of net debt calculations and covenant calculations.
Significant changes in optimizing cash flow over a short period, or more gradually over time, substantially impact net debt and covenant levels significantly if underlying earnings decline. This will most likely limit the company’s ability to access liquidity and use the cash generated as intended (e.g., cap-ex.). Because of their significance, net debt and covenant figures must be visible to all relevant stakeholders and managed timely.
It may appear counterintuitive to highlight actual versus forecast differences on a cash flow forecasting system dashboard that executives and other senior stakeholders use. However, if handled properly, it can significantly boost the credibility of the overall cash reporting process and the dashboard itself.
Furthermore, highlighting and explaining a significant variance puts the head office finance or treasury team in control of the process by preventing crises.
Including high-level forecast variance analysis on the dashboard helps users understand the major factors influencing forecast accuracy and ensures that the data quality is constantly monitored.
During the pandemic, treasuries with access to such a dashboard gained real-time visibility into their consolidated current and projected cash/liquidity. Businesses found it extremely difficult to survive and stay afloat in the long run due to the rapidly deteriorating market liquidity. Cash flow optimization dashboards enabled treasurers to quickly collect actionable KPI insights and adapt their cash and liquidity management strategy by facilitating quick decision-making at the CFO/Board level.
During such trying times, the true value of a cash flow optimization dashboard (simple to build and easy to use) became abundantly clear. As a result, the availability of real-time, accurate cash/liquidity data has become a requirement rather than a luxury for an agile and intelligent treasury.
A dashboard is a powerful tool that meets today’s finance needs when analyzing KPIs and financial data. However, picking the right one can be difficult in a market with different dashboards.
Get in touch with our expert panel to learn more about the treasury cash flow forecasting software of HighRadius.
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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.