Contracts, work orders, invoices, customer information, whatever it is, without visibility you will always be carrying risk.
The financial reality
In cash flow management, the risks of poor visibility can quickly devolve into an existential crisis. That may be why the perpetual number one item on the treasury’s agenda is cash flow forecasting.
What leading executives say
Volatility and unpredictability, in cash flow – especially in times of business disruption, whether economic, social, or logistical – demands an intelligent approach to financial planning that puts your organization in a position to leverage funds when they are available. That requires holistic visibility to both inflows and outflows.
Poor financial visibility: The Backstory
The economy is fragile, and things feel uncertain, especially with inflation putting a damper on the general outlook compounded by a fraught geopolitical situation.
With all that as a framework, business owners and financial teams saddled with a lack of cash flow and visibility will not have the forecasting capability necessary to make optimal business decisions. This lack of visibility exists for a number of reasons, generally including some combination of people, process, and technology:
Overreliance on manual or partially automated processes
Inadequate staff and/or skills for accurate cash flow forecasting (or teams are mired in those manual processes)
Disparate or outdated backend financial technology system that are not robust or integrated, or lack true master data management
Inconsistencies and siloes between cash inflow and outflow processes – a lack of holistic oversight
Any one of these conditions makes cash flow visibility hazy; when there are multiple conditions, then financial forecasting becomes exponentially difficult.
So, what’s the answer? A clear visibility practice
Putting a solid holistic cash forecasting strategy and practice in place requires total commitment, a rigorous use of analytics, silo-busting collaboration between AP and AR processes, and a real-time view of cash inflows and outflows.
Easier said than done? Not as much as might expect. The executive buy-in to being cash-flow focused should be a given – after all, liberating working capital is going to make it much easier and more efficient to fund other corporate initiatives. Where significant effort should be concentrated is on developing seamless AP and AR.
Digitally integrating AP and AR processes through cash flow forecasting solutions and automation will unlock the crucial data needed for insight-driven decision making.
AP and AR data hold an untold wealth of information on company health, as they are effectively both sides of the cash flow coin. When combined with a heavy data management and analytics practice, that is where real-time holistic cash flow visibility can be gained and leveraged to drive financial agility and improve forward thinking strategies.
Forward thinking
Since technology and automation can help tap the hidden working capital in an organization, the immediate goal should be to find a solution provider who can help drive an AP/AR transformation. Ideally, that AP and AR automation technology partner will also offer:
Broad industry expertise
A track record of success
Best practice advisory
Additional managed services
Weathering economic uncertainty becomes a lot more viable when you have the insights and financial agility that come from holistic cash flow visibility.