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Five common cash flow management problems and solutions

What you’ll learn

  • Learn more about the problems of cash flow management
  • Discover the cash flow management strategies to overcome problems

Cash flow management problems and solutions

Cash management is the process of keeping track of how much money comes in and goes out of the business.

Five common problems of cash management

  1. Standardization and centralization: Standardization is achieved by setting guidelines regarding how a product/service is created or supported, and how a business is operated, or how certain required processes are governed. The purpose of standardization is to enforce a level of consistency or uniformity to certain practices/operations.It is challenging to standardize and centralize cash management processes when a company deals with multiple banks, ERPs, and financial systems. Without a centralized system to synchronize various systems, standardizing can be difficult.
  2. Bank data volume: The volume of transactions in the system and banks tends to increase as companies grow and new units open around the world. For many of these businesses, viewing their cash balances across multiple entities and geographies is difficult, especially in a decentralized environment.
  3. Manual and time-consuming processes: Individual task execution can result in data entry errors and a significant amount of time consumed. Consolidating, inputting, and verifying the accuracy of data takes up a lot of time, leaving only a small amount of time for cash flow management strategic endeavors.Payment processing times and a lack of information transmitted with payments are two major roadblocks to quick reconciliation. When cross-border payments and currency fluctuations are factored in, payment processing and verification become more difficult.
  4. Settlements/transactions in multiple currencies: Without a cash flow management strategy in place, cross-border receivables can be costly and complicated. Reconciliation, currency-related complexities, and sub-optimal payment terms are the top three challenges associated with cross-border receivables. As a result, currency rate fluctuations can have a negative impact on profit.
  5. Regulatory changes: Compliance can be difficult to ensure due to constantly changing laws, regulations, and employment practices. In a high-risk law, for example, if the department lacks a cash flow management strategy, counterparty risk, and existing controls, it may be worthwhile to consider whether working in that segment will provide significant value.When a company is not compliant and there are no internal controls in place to prevent it, fraud, lack of care, and lawsuits can occur.

How to prevent or overcome the problems with cash flow management strategies?

  • Process readjustment and analysis: Understanding the problems of cash management is only the first step. The value is in implementing effective solutions to overcome obstacles.Analyzing existing systems and workflows to determine where problems of cash management exist is the first step to problem-solving.
  • Examining the historical cash flows: It’s critical to review historical cash flows before implementing a structured forecasting workflow. This gives valuable insight into the nature of current cash flow movements, allowing users to spot any flaws or discrepancies.
  • Analyzing and providing feedback on data regularly: Following the implementation of the new cash flow structure, the next step is to ensure having an automated workflow in place to provide users with feedback on the accuracy of their data.

Benefits of business cash flow management software

Here are some benefits of business cash flow management software:

  • Automated repetitive tasks: Bank statement processing and reconciliation automation saves time, eliminates errors, and frees up cash managers to focus on higher-value tasks.
  • Regular global cash visibility: Cash utilization is improved by having a single dashboard view of the cash across all banks, regions, companies, and currencies.
  • Informed decision-making: Users gain access to critical information and more time to make better investment and funding decisions with global cash visibility.
  • Enhanced profitability: Informed and timely investment or funding decisions help to minimize interest expense or maximize interest income.

To learn how to overcome cash management problems through cash management software, schedule a demo.

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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.