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How to Choose the Best Cash Flow Tool for Enterprise Management

How does this ebook help me?
Use this e-book to evaluate treasury tools and identify the best-fit solution through a must-have metrics scorecard.

Table of Contents

01.
What is a cash flow analysis?
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02.
What are the most important features that treasurers look for in cash management and cash forecasting software?
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03.
Must have metrics for choosing the best-fit cash flow tool for your enterprise
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04.
Selection of best-fit cash flow tool
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05.
Checklist before implementing the best-fit cash flow tool
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Chapter 01

What is a cash flow analysis?


A cash flow analysis is a financial analysis that shows how money flows into and out of business over a specific time. It can help the treasury team comprehend where their money goes and how much cash they have on hand at any given time. This must be done at least monthly to ensure that the company’s cash flow is healthy.

Cash flow analysis

A corporation must first prepare cash flow statements for operating, investment, and financing cash flows to perform a cash flow analysis.

To calculate net income, the cash flow statement direct method applies all cash receipts from operating operations and subtracts all cash outflows from operating activities.

Non-cash revenue and spending elements are added or subtracted from net income in the indirect cash flow statement.

Can a profitable business have cash flow problems?

Net cash outflows may not always imply that a company is experiencing cash flow problems. When making massive payments or dealing with seasonal business changes, businesses frequently experience a net cash outflow. When outflows surpass inflows, cash flow becomes an issue. At that moment, a company had depleted its cash reserves and could not meet its obligations.

When analyzing a company’s cash flow, what factors should be considered?

  • Cash flow from operations:

    A company’s goal is to make a profit, and while a few months of losses from operations aren’t always critical, this number should be as positive as possible. The ideal scenario is this line increases every quarter or at least every year.

  • Income not yet paid by customers:

    In this scenario, a company has profit but has uncollected debt from their customers or late payments. This significantly decreases the company’s overall cash flow and may indicate that the company should do a better job collecting invoices. 

  • Investment in equipment:

    Unexpected costs can disrupt a company’s cash flow. A corporation needs to spend money on new equipment. This is generally a one-time expense that will pay off in future cash statements.

  • Ending cash balance:

    Ending cash is the amount of money a corporation has after deducting the cash change and starting cash balance for the current financial period. Companies face various scenarios. For instance, uncollected debt, an unexpected equipment purchase, and cash pulled by the company’s owner. These affect a company’s capital if scenario analysis is not done properly.

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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.