Cash & Liquidity Management

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Moving from Fragmented to Centralised Cash Management The author looks at the benefits of real-time, centralised cash management - and explain how to accelerate and optimise even further.

Moving from Fragmented to Centralised Cash Management

by Mickey Vonckx, Head of Sales Europe, Hanse Orga International

This article outlines the benefits of real-time, centralised cash management, and how it can be accelerated and optimised with the help of specialised technology.

Driving financial efficiency and managing risk are top priorities on the treasury agenda. Many companies lack a central overview of their cash, and are therefore facing unexpected idle liquidity which introduces significant inefficiencies. The fragmented information about cash and financial transactions do not allow for an accurate view on the company’s exposure. The most efficient remedy for such a situation is central cash management.

The challenges

It can be particularly challenging for treasurers of large corporations with many subsidiaries to keep track of important financial information. They have to account for the various cash flows, payment flows, and cash positions of each subsidiary, as well as the total numbers of company bank accounts. Often, when these treasurers require a real-time view of the company’s cash situation, it triggers lots of parallel manual activities by various departments and local entities. Employees will have to update spreadsheets with the latest figures and to modify planning data before the requested information is forwarded to the head office. These fragmented manual processes easily introduce errors or inconsistencies and it takes time before the cash positions and forecasts are populated. As more and more banking information becomes available in real time and business environments become increasingly complex the challenge for cash managers grows quickly as well.

With the treasurer left to work from this potentially incomplete and unreliable information, companies can consequently lose out on opportunities for investing surpluses or for settling deficient accounts. Companies can also see a significant impact on their cash forecasting.

Consolidating dispersed data sources

Although many companies have significantly stepped up their efforts in recent years to optimise their cash management and cash flow forecasting, there is still room for improvement. The limitations of using spreadsheets for consolidating such fragmented data are obvious: many manual tasks are involved which may lead to errors and tie up staff who could work more effectively on analysing the actual results.

Implementing specialised technology

The change is here. By deploying specialised technology, which is ideally fully embedded in centralised ERP systems, for example SAP, corporates are on the inside track when it comes to efficient cash flow forecasting. With such a solution, all balances of the company’s subsidiaries are automatically, and without any risk-prone interfaces, integrated into a single and central real-time view. Whatever the types of systems, currencies or local conditions, the balances of all subsidiaries are taken into account and seamlessly integrated to enable company-wide visibility. It is not the accounting data that forms the basis for the forecasting, but instead the planning is based on the more up-to-date actual data that is received from the banks end of day or even intra-day. Automated processes reduce the time-consuming manual transfer of information from one source to the other and ensure reliability. International corporations benefit from time-saving, automated technology that enables a comprehensive and company-wide overview in real time. The actual financial situation of a company becomes instantly clear, and cash flow forecasting is based on solid data instead of best guesses. This drives efficiency gains and also allows for a reliable performance analysis of the company’s subsidiaries, business operations, products and other elements.

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