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Why treasury leaders should automate cash flow management

What you’ll learn


  • The key responsibilities of a cash manager
  • Importance of cash management and challenges faced in managing cash
  • How to manage cash using an automated cash flow management
  • system


What are the responsibilities of a cash manager?

Here are some duties of a cash manager:

  • Control incoming and outgoing cash daily
  • Prepare a monthly variance report after analyzing the company’s cash flow mechanism
  • Update the daily transaction accounting database
  • Make copies of all financial information on hand
  • Maintain the privacy and security of financial records
  • Resolve any potential foreign currency exchange issues
  • Maintain financial transactions and report integrity and accuracy

Why is cash flow management important?

Cash management is vital for establishing and maintaining financial stability in a business. Cash flow management requires regular reporting and a good grasp of finances. Without it, the company could be in a liquidity crisis. Managing cash flow takes time and requires attention to detail, and it is critical to the company’s success for:

  • Maintaining a rapport with vendors
  • Refining financial planning
  • Improving return on investment

What problems do treasury leaders face in cash flow management?

These are the problems faced by treasury leaders in cash flow management:

Challenges faced by treasury leaders

Poor global cash visibility:
Companies need high cash visibility to make decisions. Data distributed across TMS, ERPs, bank portals, and sales order systems limits visibility. Non-standard processes can also result in erroneous forecasts, resulting in low visibility.

Assumption-based decision-making:
The following factors reduce the accuracy of projections:

  • Manual data extraction
  • Low visibility
  • The complexity of A/R and A/P

As a result, CFOs need to rely on outdated data that preventing from making effective decisions.

Low frequency of forecasting and variance analysis:
Treasury spends a lot of time on manual data extraction and cash forecasting. So, it’s challenging to increase the frequency of cash forecasting and variance analysis.

Lack of security:
The treasury is more vulnerable to cyber threats from manual systems and processes. In addition, low visibility impedes risk management.

Increased cash buffers:
Increased cash buffers and improper use of idle cash lead to lost opportunities in value creation. Treasury personnel cannot use excess cash for M&A or investment without knowing how much idle cash they have. Thus the ROI would decrease.

Higher borrowing costs:
Legacy systems cannot capture the amount of cash on hand and line of credit. Hence, companies are more likely to borrow money late and pay higher interest rates.

How to manage cash flows using automated cash flow management services?

Automated cash flow management services simplify the treasury processes by reducing manual duties. This allows financial professionals to focus on liquidity and risk management, improving team efficiency.

A recent McKinsey study shows how technological changes are helping businesses grow:

Challenges faced by treasury leaders

What are the features of cash flow management automation?

These are the features provided by cash flow management automation that help treasury leaders:

  • Constant cash visibility:
    Cash flow management automation provides users with dashboards to improve cash flow visibility.

    Uses of constant cash visibility:

    • Understand cash position
    • Use the extra cash for better returns
    • Control risks before they negatively impact your business
  • Seamless data aggregation:
    Cash flow management automation enables seamless data integration with data sources (TMS, Banks, Spreadsheets, etc.).

    Uses of automated data gathering:

    • Reduces manual and time-taking tasks
    • Eliminates errors
    • Supports easy and timely data access
    • Improves insights into cash movements
  • Intercompany and notional pool balances capturing:
    It captures intercompany transactions, balances, and interest across all mirrored and notional bank accounts.

    Uses of intercompany and notional pool balances:

    • Better tracking of records and reconciled transactions between companies and the rest of the group.
    • Notional pooling allows a company to keep its interest expense to the least.
    • Enables each company to increase profit while maintaining daily cash management access.
  • Automated bank reconciliation:
    It automatically compares a company’s bank statements to its accounting records.

    Characteristics:

    • Automated bank statement processing
    • Automatic enrichment of inflow/outflow data
    • Invoice matching

    Uses of bank reconciliation:
    Bank reconciliation identifies differences between the accounting records and the bank statement. Hence, it helps spot fraudulent activities to protect companies.

A success story of HighRadius cash management system

A $10M tech firm was facing these challenges in cash management:

  • Manual effort due to inability to integrate with the sources
  • A/R and A/P largely contributed to the variance
  • The spreadsheet-based process lacked scalability
  • No visibility on the number of available funds and where they are.

After using the HighRadius cash management solution, they were able to get these benefits:

  • Continuous global cash visibility
  • Manage vendor payments
  • Automate repetitive task
  • Better planning of cash flows

Treasury leaders seek these benefits to overcome their cash management hurdles. Schedule a demo to learn how to use cash flow management automation to meet your goals.

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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.