How enhanced cash flow visibility streamlines access to funds and fuels investment opportunities

12 January 2018

Russell Bennett Chief Technology Officer, Fraedom

Cash flow is key for any organisation. Get it wrong and you can put the existence of the business in jeopardy. Get it right, however, and you open up a wealth of new opportunities for your company. As an illustration, a US Bank study indicated that 82% of business failures are due to poor cash management. On the other side of the coin, having a positive cash flow can be key in unlocking new business deals; driving incremental revenue streams and fuelling investment.

The blame for poor cash flow is often placed at the door of traditional banks for not agreeing to extra lending quickly enough. That can be a contributory factor, of course, but the real scourge is not keeping a tight rein on spending and not developing or adhering to accurate forecasts.

To ensure their cash flow remains healthy at all times, businesses must have a single point of visibility over all the money that is going in and out of all their accounts. Without that, they will struggle to make informed financial decisions or to plan ahead efficiently and effectively. However, enhanced cash flow visibility is not always easy to achieve.

Organisations typically make use of multiple different payment types from cheques to credit cards to bank transfers – and often have no clear overall picture, either at a snapshot level or historically, of all the transactions they are making. Often, they are using outdated methods of dealing with payments, expenses, invoicing and reporting, or, even worse, have no planned approach. All this slows down the ability for the business to react, to access revenues and redistribute in the event of unforeseen circumstances. It also offers little in terms of up-to-date analysis.

That’s why integrated payment management or consolidation is critical to businesses that want real time visibility of their spend and the kind of insight into cash flow that drives long-term business success.

The concept of integration is a familiar one, of course. Enterprise Resource Planning (ERP) systems have been around for decades now. ERP, and variations on the theme, is now a ubiquitous technology across large corporate enterprises and increasingly across SMBs also. Yet at the same time, as this enhanced level of control was being exerted on back-end processes, we also witnessed a counter trend where employees were armed with credit cards and cheque books and empowered to make significant business purchases.

That latter trend has clearly helped drive operational flexibility and business agility. More important still, it has driven cash flow which remains key for any business today. The need to continue to drive this over time is likely to generate further activity with more businesses looking to leverage lines of credit and tap into free funds for a period to help with cash management. It’s becoming increasingly vital that businesses have real time oversight over all this activity but how can they achieve it today?

The best way is through a digital expenses platform and integrated payments tools, both of which should almost by default improve a business’s approach to how it manages cash flow. By having an immediate oversight through live reporting of all spending from business cards and invoice payments, as well as balances and credit limits across departments and individuals, businesses can foresee potential problems more quickly and react accordingly.

Retaining money longer

Such an approach also allows management to categorise spending and quickly see where costs are getting out of control or where they need to put in place cash flow targets that help ensure solvency. Cards can be cancelled or at least suspended quickly and easily, negating the need of having to go through to the issuing bank, while invoices can also be automated to streamline business payments. This allows business to keep hold of money longer and pay creditors faster.

Moreover, digitally transforming business expenses and payments, encompassing everything from receipt capture through to automated payments and invoicing, means there will always be a digital trail that can be collated and reported on quickly and easily. This also means that at any moment in time, management can use fresh data to accurately forecast cash flow, which in turn helps eliminate nasty surprises and should also lead to fewer business failures.

The ongoing digitisation of systems will also inevitably result over the long term in greater take-up of emerging trends in artificial intelligence and analytics-driven technologies. This will help organisations to more accurately predict their future spend, thereby giving them early insight into potential upcoming cash flow issues and enabling them to look ahead into what is going to be happening in the market moving forwards.

It’s another example of how technology today can have a key role to play in helping businesses gain more insight into their cash flow and better manage their cash in general. If they get that right, they are likely to tap into new investment opportunities; drive competitive edge and ultimately survive and thrive both today and long into the future.

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