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Where's the Cash?


Knowing exactly where the company’s cash is at any given time seems like a very basic requirement. But even in this digital age it can be a challenge: a 2019 survey by PwC showed that 25% of cash is not visible to treasury on a daily basis. This lack of visibility poses a real operational risk, including the danger of large sums going missing if they slip from view. This is particularly true in times of crisis and the Covid-19 pandemic has put the importance of cash visibility back into the focus of treasurers.


To help achieve visibility of cash, preferably in real time, treasurers should first ensure their electronic banking channels are in good order – and that all bank accounts are accessible. This can be tough, especially in developing economies, but digitised solutions such as software tools and managed service offerings are available to help treasurers connect to their banks and handle a variety of different file formats. So, the message here is to consider leveraging technology and outsourcing to a specialist if you don’t have the in-house resources to help you achieve cash visibility.

Equally important as knowing the whereabouts of your cash is accurate cash forecasting. In the days when money was readily available, forecasting skills took something of a back seat in many organisations. But today, the Covid-19 pandemic has refocused attention on cash forecasting since this is a cornerstone of maintaining liquidity.

When looking to forecast accurately, receivables are often a challenge, especially for B2B organisations. There are myriad reasons why receivables don’t translate properly into cash: customers are unhappy with the delivery, or they don’t pay on time, or forget to pay full stop! One remedy is for treasury to enhance the accounting data with data received from the collections department, which keeps track of disputes and knows which customers will pay and when they do so. In other words, break down the silos between accounting and treasury and connect the collections department with the treasury department so that detailed operational customer information flows into treasury’s forecasts.

It is true that technologies such as artificial intelligence and machine learning could assist in the overall endeavour of improving cash forecasting. Nevertheless, it is necessary to have the right historical data in order to train prediction models effectively. So, before technology is deployed, it is vital to ensure data is clean and accurate.

Cash allocation is another key factor in improving overall control of cash and helping the organisation to maintain liquidity. Make sure your cash allocation is in order, automating it to its fullest extent. Squeezing every bit of information out of bank statements and processing remittance advices in a timely manner provide a great deal of value to the business, in a short time frame. If your cash allocation is not up-to-scratch, your collection processes suffer – collection agents will waste time on the wrong clients, who in turn will be irritated if they are hassled for payment when they have already paid. If your cash allocation is fully automated you will have no backlog and all cash will be reconciled to the invoices each day.

As far as outgoing cash is concerned, best practice dictates a global method of controlling your payables rather than a piecemeal approach. This kind of standardisation can be difficult to achieve, since relevant systems are not usually integrated into the enterprise resource planning (ERP) system. What is required is a solution – from an external expert – that understands all invoice formats that can check whether the invoice relates to an actual order and whether delivery was successful. The system should then post it automatically to the accounts department – this will help to control spend, ensure purchase orders are always issued and provide much-improved visibility of payables. Such a system also offers the additional, very valuable, benefit of reducing the risk of fraud.

In short, investing in digitisation, and the right systems, can help you to increase productivity while gaining insights that will improve both the visibility of cash and the accuracy of your forecasting. So, if you can, digitise now. But be sure to do the data groundwork in order to make the most of any new tools. Also remember the importance of human connections in breaking down silos to enable different departments to work together more efficiently – and, ultimately, to help make the organisation more resilient to future shocks.

This blog is a summary of content discussed at Serrala’s Virtual Expert Forum on 29 July 2020 – part of its CFO Playbook Series looking at Ensuring Liquidity for the Organisation. To find out more, visit: https://www2.serrala.com/ensure-liquidity-TMIarticle


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Bart Parren
SVP Solution Transformation, Serrala