What are the Key Challenges in Cash Management?

What are the Key Challenges in Cash Management?

By CFO Tech Outlook | Wednesday, June 24, 2020

With the companies that have far-reaching subsidiaries, daily cash management challenges become apparent; therefore emerging technologies help to overcome these challenges.

Fremont, CA: Primitive financial software does not provide the proper nutrients that an organization needs to operate at maximum efficiency. The execution of optimal daily cash management is a discipline that is mostly reliant on several business units and departments across a company. Because of this, treasurers are supposed to ensure that there are strict workflows in place to minimize the decentralized nature of incoming data, transparency, and banking information. New solutions are emerging that are intended to help simplify the tedious or complex cash management processes. While such solutions streamline the execution of those processes, treasurers are expected to expand their responsibilities. Top 5 FinTech Solution Companies in Europe - 2020

Here are some of the challenges which have to be acknowledged and mitigated.

Lack of forecasting speed and quality

The practice of cash flow forecasting is possible on the input of various units throughout the organization. Some groups might be cash managers, financial controllers across different subsidiaries, and so on. So the reporting and the forecasting accuracy is, dependent on the incoming data.

Redundant system and bank volume

As companies scale and new units are coming up globally, system and bank volume tend to continue to increase. Localization can be a challenge for a lot of these companies, and they need specific technology that can manage their needs better than the others. This formulates a decentralized nature regarding the transparency of data and cash availability.

An error-prone processes

The physical execution of individual tasks can result in entry errors and a lot of wasted time. Consolidating, checking, and inputting, the validity of data generally takes up a vast majority of the time, leaving scraps of time left to allocate toward strategic endeavors.

Two big hamstrings to quick reconciliation are payment processing times and lack of information transmitted with payments. This gets further complicated when cross-border payments and currency fluctuations are introduced.

Settlements or transactions in multiple currencies

As mentioned, cross-border payments and currency fluctuations further complicate cash management. Cross-border receivables can be costly and complicated without proper workflows in place. The top challenges associated with cross-border receivables fall into three broad areas: reconciliation, currency-related complexities and sub-optimal payment terms. Consequently, currency rate fluctuations can negatively affect your profit. 

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