1. Home
  2. Global Cash & Liquidity Management
  3. Global Cash Visibility

A balanced “diet” is the key to efficient cash management

Any entity that experiences growth also experiences operational hurdles. And with companies who have far-reaching subsidiaries, daily cash management challenges become apparent. 

Think of it this way:

As children, our diets can consist of sugary drinks, French fries, and chocolate milk, yet we were still able to operate at maximum speed.

As we grow older, the impact those nutrient-deficient foods have on our body becomes far less forgiving. 

More complexity, external factors, stresses, and just overall age has made it more important to keep a watchful eye on our “operation” (diet).

For corporate treasurers, a growing company works in the same way. A poor structure or primitive financial software no longer give you the proper nutrients you need to operate at maximum efficiency. 

The key to solving these cash management challenges is a healthy and balanced “diet” that combines technology with structure optimization.

Executing optimal daily cash management is a discipline that is heavily reliant on several business units and departments across your company. This can be either stressful or linear depending on your structure and technology.

Because of this, treasurers are tasked with ensuring there are strict workflows in place to minimize the decentralized nature of incoming data, transparency, and banking information.

New solutions are constantly emerging that are intended to help simplify tedious or complex cash management processes. While such solutions are simplifying the execution of those processes, treasurers are being expected to expand their responsibilities. A study conducted by CFO Research, “Next Generation Needs for Cash Management,” surveyed 371 CFOs, treasurers, and other senior finance and treasury executives. The responses show a few notable tendencies and highlight that there is a general pressure to deliver on the expanding amount of responsibilities and complexity treasurers are facing.

83% of the survey respondents said their company would need better forecasting and understanding of its cash positions to succeed in the future. With such a large percentage of respondents seeking improvements to their ability to execute effective forecasting and cash management, the availability of process and technological solutions, such as TMS, are needed. In addition, emerging technology promises additional support. An additional 76% of respondents stated they expect cash management to become even more difficult over the next five years

Cash management challenges

Here is a summary of the main challenges:

  1. lack of forecasting speed and quality
  2. redundant system and bank volume
  3. tedious manual and error-prone processes
  4. settlements or transactions in multiple currencies
  5. regulatory changes
  6. standardization, centralization and automation.

Solutions to cash management challenges

Process restructuring and analysis

The first step in optimizing any process is analyzing existing systems and workflows to determine where weaknesses lie. There are two recommendations here:

Holistic cash flow review – Having reliable insights into your cash flow movements is the healthy vegetables to your treasury diet. This will allow you to determine where discrepancies may be and act on them.

Consistent data analysis and feedback – After implementing your new cash flow structure, the next step is ensuring you have an automated or scheduled workflow to give users feedback on their data accuracy. This cash management solution is the vitamins and supplements to your treasury diet as it allows your subsidiaries to correct previous inefficiencies. 

Treasury Management System

And the next important cash management optimization is the introduction of a flexible and centralized treasury management system. 

A treasury management system (like BELLIN tm5) excels in removing many pain points regarding multiple banking interfaces and systems with multiple banks by providing one centralized system to execute banking needs. This commonly leads to a reduction in banking interfaces and harmonized processes that can be centrally monitored

With process automation, a TMS can enable treasurers to improve cash forecasting and advanced cash management. By reducing the number of errors and time that manual processes demand, treasurers can free up more time for strategy. 

Companies can create a process with a disciplined timeline for users to access and input information directly in the treasury system, each user group owns and is accountable for the accuracy of the forecast information. This solves the problem of decentralized units not being on the same page.

(Original article on https://www.bellin.com/blog/cash-management-challenges/)

Like this item? Get our Weekly Update newsletter. Subscribe today

About the author

Also see

Add a comment

New comment submissions are moderated.