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Cash is king, long live cash

Business as we know it has changed, at least for the foreseeable future. Organisations with transparent cash visibility and modern liquidity management capabilities are at an acute advantage in tackling the effects of the current economic crisis.

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By Anne-Marie Rice (Market Strategy at Analyste)

Now, more than ever, cash management remains top priority for most, if not all businesses, regardless of size and geographic location.

Global pandemics were not on risk-radars until the COVID-19 arrival and cash is now more important than ever for business survival and recovery planning. Accurate cash flow forecasting, modelling and consolidated liquidity visibility are essential survival criteria.

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Yes, we’ve experienced other global economic hiatuses during the last two decades but this time it’s different. Events such as 911 and the 2008 financial crash had far-reaching effects on the global economy, but the current crisis is unprecedented in its swift and unforeseen arrival and the sheer breadth of damage to almost all industries and sovereign economies. Not since the 1930’s has the global economy been faced with such testing times. No organization remains unaffected and we, as business & finance leaders, are faced with a two-pronged challenge of survival and recovery – with no historic precedent or reference case to guide us.

I recently hosted a podcast with Anna-Lisa Natchev (VP at Analyste) and David Kelin (CEO at DNA Treasury) to examine the subject of cash management in a crisis and to explore some of the key challenges finance and treasury are facing as their organisation’s frontline defense. Here are just some of the key outputs from our discussion:

Listen to the full podcast HERE

Businesses are now operating in a landscape of great uncertainty, at a time when they need to know their true cash position, where it is and how to get their hands on it quickly. This need hasn’t changed from pre-crisis protocol but there is now a greater urgency for real-time detail access. Some organisations have effectively ‘closed for business’ but still making payroll, keeping up with supplier payments and trying desperately to maintain cash receivables. Remaining fully informed with accurate cash visibility, right down to individual transaction level, is crucial. Companies who have invested in cash forecasting solutions and treasury technology are better placed to have full and accurate transparency around cash visibility and future positions on events like revolving credit facility payments, bond payments etc.

There are many documented examples of major disruptions to almost all business-critical supply chains – I hear first-hand accounts of businesses placing immediate stops on outgoing payments which, for their suppliers, means a negative knock-on effect from an accounts receivable position. As a result, organisations with less than favourable cash positions are burdened with a heavier reliance on debt provision. Companies who require an immediate liquidity injection may be able to take advantage of various government borrowing programmes or have hopefully put in place other external funding structures like bonds or bank facilities. But Government borrowing programmes will have to be paid back and if it’s a case that accounts receivable are not materializing, the question remains, when companies should execute pay-back, or perhaps not at all, at the case may be. This is the bigger question post-crisis; no-one knows when the economy will return to a semblance of normality, a normality that will look very different and be staged country by country as the virus progresses and eventually dissipates. Again, good technology will be vital in modelling areas such as cash forecasting.

Looking at the main challenges businesses are facing when it comes to cash management processes, the question around key areas requiring immediate triage pops up repeatedly. Understanding your cash position today and your forecast position going forward is critical. The ability to understand and view the timings of cash outflows and inflows can hugely influence well-informed decision-making processes. Considering pushing payments out further and negotiating with customers to receive earlier payments, perhaps with some payment discount incentives, is an option. Managing your working capital as best you can under these difficult conditions is key – a daily, or in some companies hourly, challenge.

The recent shift to remote working for finance and treasury teams must also be considered and technology has been extremely helpful in allowing businesses make this transition smoothly, with little or no interruption to daily workflow and productivity. But some areas, such as payment security, are of critical consideration with this new way of working and the question remains, does your technology, standard methods and processes facilitate the required controls for home-based operatives?

Finance and treasury leaders are also addressing the need to review how they allocate their time and focus during the current crisis. We’re witnessing a significant shift towards tactical cash management and an all-hands-on-deck approach has become synonymous with short term business survival, offering plenty of post-crisis discussion points once we’ve reached an economic safe haven. But at this stage, my guess is those companies who have the benefit of tried and tested technology will be a little less battle weary once the current crisis has abated.

Finance and treasury leaders should maybe resist the temptation to centralise control, rather, empower remote-working teams with a clear and concise strategy and vision. Quoting David Kelin (CEO, DNA Treasury)…‘A good leader navigates a course to the future’. The wide availability of low cost, cloud-based connectivity tools is very welcomed during these challenging times, allowing business leaders and their teams, access to a variety of online communication channels. Maybe this crisis will force us all to take a fresh look at how modern technologies can improve efficiencies and productivity.

For many businesses, time is now of the essence. Cash managers will be looking very closely at how to best approach and manage their liquidity during the current crisis. Consolidated cash visibility is vital, along with the ability to access it whenever you need it! Maximising internal and external fund sources is key and good working capital management is vital. It’s also a good time to forward plan, now is the time to identify areas such as cash visibility, reconciliation and forecasting where automation would be welcomed post-crisis.

We’re all in this crisis together and witnessing some truly inspiring examples of how businesses are helping each other navigate the current crisis.

Listen to the full podcast HERE

One of the organisations extending assistance to the finance and treasury community is Analyste, a market leading cash management and treasury solution provider.

Analyste is offering free consultations with their team of cash management specialists. In addition, the opportunity to take advantage of their cloud-based cash forecasting solution on a two-month free trial basis. No costly up-front implementation fees or lengthy lock-in contracts. For more information: contact Anna-Lisa Natchev at [email protected]

Related articles:

Say goodbye to spreadsheets (Part 2)

Say goodbye to spreadsheets (Part 1)

Does Cash Forecasting really matter?

Improving cash forecasting by tracking actuals

You can find all Analyste blogs here.

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