PwC’s 2021 Global Treasury Survey shows that one of the top three challenges treasury teams face is inaccurate forecasting and visibility. Cash forecasting and visibility are interrelated and a good starting point to improve your cash forecasting is to increase your group-wide visibility of cash to get an overview of your current cash position. Accurate data consolidated from a variety of data sources is essential to create accurate forecasts, and forecasts relying on poor quality and inaccurate data can result in suboptimal business decisions.
Good cash visibility has many benefits and is the foundation of any effective cash management activity. In this blog, you will learn how to improve cash visibility in your organization and what will be the potential benefits of knowing the balances of each bank account as well as the cash inflows and outflows.
What is cash visibility?
Cash visibility is, just as it sounds, the degree of visibility you have of your cash. Simply put, this means that complete cash visibility is consistently having accurate information on your accounts and knowing how much cash you have within the organization, where it is, where the cash flow is coming from, and what the cash outflows are per subsidiary or account. Cash visibility is the foundation of understanding your corporate cash flow. It enables organizations to better access available cash at hand, control funds better, and manage or minimize risks. Additionally, having accurate visibility into the company’s cash position makes it easier to evaluate whether there are alternatives for optimizing the use of your cash so that it can generate a better return.
How to increase cash visibility
The more complex the organization structure is, the more challenging it can be to get an overview of all the cash within the organization.
It is common to have multiple banking partners and operations in more than one country. Even within one country, there can be multiple banks that a company is working with. Sometimes, the reporting and format of data also differ within the organization, and multiple ERPs and other systems with different endpoints require integrations to pull the data from the systems to a single place. These are all elements that can complicate the visibility.
A first step to achieving better visibility is centralization. Having all data available in one place simplifies your work significantly, and you can get a clear overview of your financial situation. It could, for example, be beneficial to adopt a bank account management (BAM) tool to which you can connect all your bank accounts. Regardless of how many bank accounts you have, you can get a complete digital overview of all your accounts at any time. Sometimes the connections happen gradually, starting with a few accounts and later adding more and more.
A multi-bank solution that can connect all your banks and integrate with your existing systems, such as TMS and ERP(s), is also a step towards increased visibility that make data easily accessible. With the consolidation and connection of all your data from your different systems, you can view your cash position in real-time, which is beneficial, especially for your short-term forecasting and business decisions.
To utilize your data in the best way possible, a flexible reporting tool that can help you with reports and dashboards is worth investigating. A reporting tool giving you the possibility to add information into easily understandable reports can help you create a clear view of your cash balances.
The benefits of cash visibility
Real-time financial status
Imagine having access to your financial status anytime from anywhere. Access all your data related to accounts, investments, financing transactions, and credit lines whenever you need it, easily in one place. With all the data consolidated in one place, you can create the reports you need to, for example, better forecast future cash flows, inflows, outflows, and better deal with FX risks.
Access control and risk exposure
A method for increasing your cash visibility is using a cloud system to centralize your data. Many cloud systems have robust security measures that reduce the risk of data theft compared to using unsure network drives or storing excel files on your computer. With central visibility, you can also keep track of who has access to what and trace user behavior and activities across the whole organization. Audit trails are important and necessary for compliance and to reduce fraud, and with the centralization of data in a cloud system, you can also better control your payment processes.
Understanding of cash flows
With cash visibility, you get a better understanding of your cash flows. A clear view of your cash flow enables you to locate idle cash, allocate cash where needed, avoid loaning more than necessary, and keeping a larger buffer than you require. As a result, you can utilize available cash more efficiently.
Comparison and improvements
Lastly, with a uniform process and consistent reporting in one place, you can easily compare your forecast against actual outcomes. Since you have the actual results presented clearly in your accounts, you immediately get a conclusion on how well you have been performing against the forecasts, and you can see what could potentially be improved in the future to optimize your liquidity.
In summary, you will benefit from increasing your cash visibility since it is the foundation for making strategic investments and business decisions, minimizing debt and expenses, reducing risk exposure, and growing your business.
Increase cash visibility with a cloud system
Collecting data from different banks and systems to get an overview of your group's cash is time-consuming. The manual work of collecting this information also includes a risk for errors, and often you only have the data available at the end of the day. Cloud-based systems are great for connecting your banks and other systems, such as TMS and ERP(s), and provide real-time access to, and aggregation of data. It is possible to achieve real-time cash visibility via cloud solutions, even if you use multiple systems and banks and have operations in multiple countries.