Cash Flow Management Automation, Why Now?

Finance and treasury teams have always been managing treasury operations, even before Excel came into existence.

Tracking payments, making intercompany transfers, hedging currency risks, and managing debt and investments aren’t new tasks. Moreover, many of these tasks are repetitive, inefficient, time-consuming, and error-prone. But still, up until recently, mid-size companies and small enterprises used manual processes to track, monitor, and manage cash flow, leaving automated treasury management systems to large enterprises.

This trend is now shifting, with more mid-size and small enterprises companies looking for ways to automate their treasury and cash flow management. And for good reason – a number of important developments make cash flow management more critical than ever for these businesses, creating a strong incentive to optimize and automate processes:
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Rising interest rates

The end of ZIRP and rising interest rates, create a need to manage both cash reserves and debt more efficiently. There’s a huge incentive to optimize yield on one hand and minimize cost of capital on the other. 

Poor cash management leads to significant losses and missed income opportunities for companies that hit the bottomline harder than ever before in the last 15 years. Another possible contributor, also related to the end of ZIRP, is that capital became more scarce, which means the need to efficiently manage existing capital has become greater.
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Globalization

Companies are going global at an increasing pace, opening off-shore accounts,e and transacting in more currencies than ever before. This global movement opens up a much wider pool of opportunities for commercial expansion on the one hand, but on the other - it also creates a more decentralized cash footprint, which is much harder to track and manage. 

So while the world is becoming smaller, finance teams' workload is blowing up to almost unmanageable proportions.
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Increased counterparty risk

SVB and FRB’s implosion turned the spotlight on banks’ financial stability. This means that knowing that your company’s cash is stored in a reputable bank is simply no longer enough. Because of that, more boards and management teams are demanding that finance leaders adhere to a strict policy, and hedge against counterparty risk by opening and managing accounts across multiple banks. 

This “placing your eggs in multiple baskets” strategy, while mitigating some risks, also makes it more challenging for finance teams to track and manage cash flow, creating an increased demand for real-time cash visibility and control.

Final thoughts

The convergence of the trends above, coupled with the accelerating availability of banking APIs and other open banking solutions, are enabling new and improved solutions that better fit the needs of mid-size companies. 

There’s an unprecedented opportunity for finance leaders to act now and get rid of manual, error-prone, time-consuming processes. Automating your treasury operations is how you can enable your company to save precious time, regain control, and most importantly – improve your capital efficiency. It’s high time to get smarter.