Cash flow management

According to a study published by the consulting Improven, 77% of the companies in crisis do not have the necessary tools to correctly manage their cash flow.

In the current economic situation all businesses and especially small and midsize businesses (SMB), because of their major financial weakness and lack of guarantees, have to closely watch their short-term management. To obtain a solid future cash flow position with certain guarantees is a task of great effort and faith.

Not having all necessary data and the different market variables at strategic defining times, can lead to making biased decisions that do not achieve the desired results. The negative impact of not knowing the correct state of the future situation will lead not just to worsen financial results by over-investment or financing but also cause payment of unnecessary fees and expenses and a high opportunity cost.

Why using a good cash flow management solution?

The main reason why businesses want a system is the understanding of the role of a treasury department.

Because of the academic education in Spain the financial concept is linked to accounting and the record of the past operations, ignoring until now the role of the treasurer. The proof is that during the 90’s almost all businesses that required a cash flow management system were multinationals.

Why do they have them? To be competitive

They know that small details make the difference, and financial expenses are a small big detail

Treasury is only considered in times of economic uncertainty or business growth. The main consequence is the lack of capacity needed to handle growth, or paperwork overflows that cause a sense of insecurity because of not knowing where we are going. And this latter one is the reason for requiring a treasury system.

Nowadays, large easily controlled businesses are easy to find while small ones are a chaos. We suggest you do a small test to find out where your business stands now and to discover the potential benefits with good cash management and accordingly, for the actions not being done, what benefits would the hypothetical implementation of an automated system provide.

Extreme causes for implementing a Cash Management solution

• Payments for overdrafts despite having balances in other accounts or banks.
• Doubts about whether account balances can cope whit payments or payrolls.
• Believe that fees and or expenses are excessive.

Causes for implementing a Cash Management solution

• Maintenance of very large credit lines or discounts because you don’t know how much you will need.
• Loss of time calculating future cash flow.
• Unreliability of spreadsheets and/or their maintenance is complicated.
• You would like to know the cash-flow of certain projects, promotions and their impact on the business’ financial expenses.
• Discounts portfolio because of automation, regardless of costs or needs. .
• It is difficult to have a cash flow budget and to track the diversion causes.