Top 5 Cash Management Challenges and How to Address Them

Cash management is the tracking and monitoring of a business’ cash inflows and outflows. It ensures the business can meet its obligations and remain financially stable – both in the short and long term. While it’s something an organization must intentionally do, there are several hurdles that commonly stand in the way.   

Legacy Systems and Processes 

Finance teams in many companies perform most cash management tasks manually and rely on legacy systems that have limited connectivity with the rest of the business. Not only does this bring inefficiencies and delays, but it increases the potential for human error, since data needs to be copied, pasted, and otherwise manipulated.  

Additionally, this exposes the business to fraud since there are no audit trails, encryption measures, or other built-in security controls.  

Lack of Cash Visibility 

As businesses grow, their number of bank accounts, entities, geographies, and currencies expand as well. The business routinely needs an account of where each of these stands. This means they must log in to various portals or several legacy systems to extract the relevant information and consolidate it into one central spot, usually a spreadsheet.  

Because this process can take a day or longer depending on the number of sources, the data is routinely too incomplete or outdated to be of any use. Organizations have only a partial picture of their cash and accounts as a result, making it tough to proactively manage their finances. 

Inaccurate Forecasts 

Not only should businesses know where they stand in the present. They also need accurate insight to forecast what things will look like in the future.  

Forecasting cash inflows and outflows by the day, week, month, quarter, and year requires inputs from other areas of the business, such as accounts payable, accounts receivable, and payroll. But this data is often siloed, making it inaccessible for treasury professionals to include in their analysis.  

This isn’t optimal when the business needs to know if they are going to be able to meet their short-term commitments. Not to mention, it makes longer-term strategic investments a guessing game. How can the business know if the time is right to expand, perform acquisitions, or make loan repayments? 

Manual Accounts Payable and Payments 

Finance teams are often stuck with manual or semi-manual accounts payable processes, which may lead to human errors and delays. This can translate into duplicate payments and late payment penalties. Plus, businesses may miss out on early payment discounts and be unable to negotiate better payment terms with suppliers. All of these can have a direct impact on cash flow.  

Uncertain Economic Outlook 

Accurate cash flow management is key at the best of times. Turbulent times, such as market volatility, fluctuating interest rates and currency values, and supply chain risk put pressure on businesses to constantly assess and reassess the cash flow cycle. That is challenging to do with decentralized, inaccurate, and incomplete data.   

Digitizing for Cash Management Success 

One of the primary ways businesses can overcome these cash management hurdles is by modernizing with the right technology. What this looks like for each company can vary. Many large, complex enterprises opt for robust Treasury Management Systems (TMS) that help manage a wide array of tasks in the office of the CFO. Others, particularly mid-sized organizations, tend to gravitate towards cloud-based cash management solutions that are faster and easier to implement. These offerings provide just the right level of functionality for managing cash across the organization more quickly, accurately, and securely. 

Whichever route they choose, businesses enjoy a host of benefits when automating cash management activities, leaving disparate systems, multiple banking portals, and spreadsheets behind. Instead, they perform all treasury functions in one system that connects seamlessly with all their bank accounts, ERPs, and other existing systems. By doing so, these companies can: 

• Gain a centralized, complete, real-time view of cash across every bank and bank account 

• Improve forecasting with automated feeds showing accounts payable, accounts receivable, payroll, and projected revenue  

• Optimize the timing of payments to maintain a healthy cash balance   

• Adapt and thrive during difficult times by diligently monitoring, analyzing, and optimizing cash movement 

Optimize Cash and Liquidity with the Right Technology  

Managing cash and liquidity is a never-ending balancing act, and the imperative to do it well only increases as the world shifts. For this reason, businesses should investigate all avenues that could make the job easier. There are options available beyond traditional Treasury Management Systems to help in that effort.