Optimizing Cash Flow and Surviving Change

Friday, December 18, 2020

COVID -19 has disrupted businesses in every sector, with a return to normal unlikely to occur in the very near future. Experts such as Global Crisis Monitor predict that financial normalcy can be expected to last well into the first quarter of 2021. COVID-19 has heavily tested the resilience of finance and accounts receivable teams. Senior finance leaders have been driven to focus on one single priority: maximizing cash flow.


It's not quite that simple, however, as many different factors can affect cash flow. Senior finance officers and CFOs identify two main challenges. In a recent survey, two-thirds of finance officers stated that a decline in revenue was a primary concern, while over half stated that accurate cash forecasting was a primary obstacle.


Trade credit insurance provider Atradius has predicted a 2.4 percent increase in the number of corporate insolvencies. This means that finance teams have had to pivot away from more risky approaches and become more cash-driven, protecting and preserving culture becoming more prevalent.


The Primacy of Cash: How receivables impact the improvement of working capital


Businesses are progressing from a "survive to thrive" approach. It's necessary to comprehend cash positions on both the long and short-term bases. Cash is the lifeblood of any business, with liquidity vital to survival in an uncertain financial climate. There's a great deal of pressure on A/R teams; even so, many teams are still working with spreadsheets and manual data analysis.


Maximizing Cash Flow: the role of technology


Before the advent of COVID-19, businesses allowed inefficiencies with regard to their financial processes. The full impact of this was not fully apparent until the pandemic and its disruptive effects. In a 2020 survey, almost a third of senior finance executives polled stated that they'd pinpointed cash automation as essential in weathering the COVID-19 storm. Many repeatable manual processes can be completely automated, freeing valuable resources. This allows the focus to move to more strategic operations.


One example is cash allocation. This is typically a manual process. If an A/R team is spending hours allocating cash, the value could be added to their jobs by automating the manual elements of their tasks to focus on more important work.


With automation increasing both the volume of work and the speed at which it's processed, AR teams and technology can work together in a productive environment. Use cases can demonstrate this.

  • One example is incoming customer payments. Prioritizing certain customer payments (those most likely to default) can make a big difference to cash flow. If a collector can see all incoming payments on a timeline, prioritizing those apt to present problems is easier.


  • Another example might be a credit team dealing with upcoming orders. If an upcoming order block can be predicted, the team can quickly begin work with sales and other stakeholders to recover the sum owing, or at least part of it.


  • Automation can also support deductions analysis. If the analyst can determine a deduction's validity, this will facilitate dispute resolutions and help recover past-due payments from large retailers. 


Machine learning, AI, and analytics help create information clarity and drive decision-making. When agility is a necessity, executives and their teams need to visualize areas of outstanding debt. By providing graphical data in real-time, new technologies also facilitate monitoring around crucial KPIs. Timely alerts and feedback are much easier to implement.


This synergy of human resources and technology supports finance teams, allowing greater control over bad debt and DSO. This contributes significantly to the maximization of cash flows and improved liquidity.


Robust Cloud-based Technology: outrunning the crisis


Attempts to predict the pandemic's effects, the duration of lockdown and quarantine arrangements, and the resulting economic changes, have been limited in their reliability. Nobody knows how the situation will evolve. With the ongoing uncertainty surrounding the progress of COVID-19, organizations must plan for a range of scenarios. Heads of finance and CFOs are increasingly aware of the need for robust IT infrastructure, along with the adoption of cloud-based order-to-cash solutions to facilitate remote working.


The ongoing shift in the types of technology and methods required to do business will continue to be driven by the need for flexible working environments. Software-as-a-service (SaaS) solutions have demonstrated their value in this context and are increasingly attractive to organizations that require better liquidity and greater agility.


The upfront CAPEX expenses involved in adopting these solutions are often prohibitively expensive. Subscription-based services are a great solution for this. 

  • SaaS allows for rapid deployment, making it easy for teams to embrace the new systems and cutting the time to value.


  • SaaS can be implemented remotely by the service provider's teams. A complete implementation is possible without the need for any on-site visits.


  • Onboarding is facilitated by simple, intuitive interfaces and online tutorials created by service providers.


With cloud-based solutions, providers can enact full remote implementations for their client businesses in a short amount of time. The process is fast and efficient, offering ample scope for adaptation. These characteristics have cemented the importance of cloud-based solutions in contexts like agile finance.


The COVID-19 pandemic has changed the economic landscape, creating significant shifts, and giving rise to unanticipated scenarios. At the same time, it's given rise to new and exciting ways of working. New business models have been developed and come to the fore. It's reasonable to assume that the widespread adoption of SaaS solutions, machine learning, and other innovations will only accelerate. These technological adaptations have been demonstrated to offer agility and resilience, allowing organizations to survive and thrive in a challenging economic environment. SaaS providers report a dramatic increase in prospective clients, with many wishing to optimize their order-to-cash processes.


It is safe to say that no matter how long the pandemic lasts, the shift towards SaaS solutions to enhance cash flows is likely to be a permanent one.


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