Managing an enterprise’s cash system and financial processes have become increasingly complex and demanding because there are risks and challenges that did not exist a decade ago. The modern business environment requires financial transparency, operational efficiency, and cash management oversight. An organization’s cash management inefficiencies can make the difference between operational survival and failure.

Changing & Challenging Environments

The global economy is expanding, diversifying and becoming more sophisticated. Supply chain and multinational offices now require financial systems that meet their needs, support collaboration and avoid financial mismanagement. Many legacy systems struggle to efficiently manage these new factors and relationships. Regionalized treasury and accounting strategies are weakening centralized control but provide better scalability and flexibility.

The growth of mergers and acquisitions have led to accounting complexities, such as multiple divisions with contrary operating procedures, and incompatible IT systems, such as accounting software systems and enterprise resource planning (ERP). This is why many businesses rely on integrated solutions and qualified service providers to help them with cash management, regulatory compliance and investment administration.

Cash Flow Reporting Visibility

Financial and accounting leaders must actively track cash flows for better forecasting and profitability. Management personnel may need to be trained how to analyze and understand capital expenditures, debt repayments, operating cash flows and common cash requirements. Knowing how to link cash flow forecasts to key capital metrics, such as days payables outstanding (DPO),  days sales outstanding (DSO) and days inventory on-hand (DIO) may help.

It is helpful to actively review variances to actual results in order to refine and improve the accuracy of forecast models and assumptions. Integrating cash flow forecasting with P&L statements and balance sheet will help track performance against KPIs. Front-line staff can implement optimization techniques to improve cash management, such as collections scheduling and benchmarking vendor contracts against industry standards.

Domestic Payment Management

Electronic funds transfer systems, such as Automated Clearing House (ACH), are popular because they minimize certain risks, such as check fraud, duplicate checks and the failure to meet escheatment requirements. Digital systems are an excellent way to manage repetitive AP payments. They minimize errors and offer more cost savings through contractual discounts, but they are legitimate concerns about the loss of check float and the need to provide detailed remittance data.

Centralized systems offer mountains of master data that can be analyzed through the power of Big Data, machine learning and artificial intelligence. Daily exception reports can help to flag, track and resolve account anomalies. Domestic wire payment systems, such as real-time gross settlement (RTGS), are useful for using same-day settlement requirements. Companies can improve their accounts receivable collection performance through internal audits, daily reconciliations and free consultations.

International Payment Management

Some of the most daunting cash management challenges facing global companies involve electronic funds transfers. Due to the fact that the majority of countries around the world have their own ACH structures, this requires in-depth knowledge of local requirements. Many companies are implementing single-payments that automatically configure international payments into the necessary format.

Some companies are implementing enterprise payment architectures that can create banks, nation- and industry-specific payment formats. Creating a library of bank-specific adapters may satisfy the unique formatting needs of individual banks across the world. Many financial leaders follow the latest industry-standard electronic payment news for BACS, Fedwire and the Society for Worldwide Interbank Financial Telecommunications (SWIFT).

It always helps to benchmark the effectiveness of key financial systems and investment activities. These include capital market access, accounts receivable collection, cyber-security defense, company valuation analysis, merchant processing services, cash flow planning and debt restructuring strategies.  Part two will cover risk mitigation, enhanced reporting and managing financial workflows, business processes