Cash flow remains essential for companies despite changing market conditions. Without appropriate cash flow optimization, businesses can be profitable. But they remain at risk of bankruptcy if they can’t plan their investments and expenditure.
Financial teams always face financial challenges according to economic conditions. They always work harder to achieve a company’s financial goals to stabilize the position and achieve growth goals. They plan for every financial move according to businesses’ needs. This involves cash flow on priority in the wake of digital transformation in the financial industry.
While these roles remain core focus areas, the current economic state demands a new focus on cash flow. They must encourage other stakeholders to become profitable with fewer resources to enhance liquidity and improve profitability. Financial chiefs must look after three crucial components to effectively execute cash flow objectives: technology investments, systematic strategies, and resources.
New Transformations, New Needs
Cash maintenance requires more attention in the era of high finance and business growth. Currently, financial chiefs are more focused on expanding economic growth possibilities. To do that, they must closely watch cash inflows and outflows. While businesses and economic situations will change, chiefs can optimize cash flow by following these steps.
Data Gathering
Chiefs must build a cash flow model to optimize cash flow. The model will help them to get a complete picture of the organization’s cash inflows and outflows in data forms. They must also build KPIs to understand the drivers creating cash value across the businesses. These fall under working capital, cost, and revenue which are the key focus areas for improvement.
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Cost reduction
Using finance data, leaders can reduce costs strategically. The accurate data will help reduce direct costs from sales and marketing, technology, and resources costs.
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Revenue Enhancement
Data of customers, technology stacks, and sales enhance revenue generation. This data also gives information about the market opportunity, customer relationships, and competitive outlook, thus helping the finance chief to conduct cash flow or improve the process.
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Working capital optimization
Managing capital expenditure, accounts receivable and payable (AR/AP), credits and cash forecasting are crucial elements of a company’s operating liquidity. The working capital shows how the cash flows across the business and prioritizes vital investment areas.
Allow Business-Wide Efficiencies
The legacy financial process lacks visibility and inefficiencies that block cash flow operations. Without visibility, business and financial leaders can’t identify issues and improve financial aspects. Leaders will need a SaaS model to automate and order cash flows. SaaS models provide a clear view of dissimilar data.
The data information will help finance teams strategize, reorder, and realign data-driven decisions to configure the cash flow process. This automated process also assists in capital management.
It identifies and automates repetitive tasks to reduce workloads and focus on key investment areas. Overall, the visibility into cash flow helps reduce unnecessary costs, optimizing the process and resulting in growth with measurable insights.
Establish a Review Schedule
Reviewing cash flow is necessary on a monthly bases. However, as financial stability has become a top priority for businesses, financial chiefs need to establish a weekly review schedule to improve and boost the cash flow process. Compare the previous cycle and its metrics with the current statement. Analyze the differences to improve the accuracy of cash flows. By scheduling the review process, financial teams can adjust the cash flows according to the payments and investments made.
Utilizing New Technology
AI and ML tools are helping financial chiefs to improve cash flows, trim unnecessary spending, and deliver real cost value to stakeholders. These tools can optimize the cash flow process efficiently. As businesses have vast financial activities, digital transformation has boosted faster and more agile financial transactions. For this, teams need technology tools that help in the fast process of such finance flows. In this aspect, AI and ML tools quickly deliver financial activities and enhance the overall workflow. However, leaders and teams need to strategize and monitor the toolkit to lead the cash flow process.
Also Read: Top Digital Transformation Considerations for Financial Organizations
Data-Supportive Decisions
Financial teams must ensure that data quality and integrity are maintained across the businesses. This will help chiefs to make data-driven decisions and implement cash-driven goals to boost business growth. Also, data is secured and aligned with regulations. For accurate data-based decisions, teams can use automation tools and gain analytics to optimize cash flows.
Working to boost data-driven decisions to optimize cash flow can help in these ways:
- Ensure better data integrity by creating a particular repository of data storage. It should allow authorized staff to access and update information and the tool.
- Ensure GDPR compliance with data storage.
- Enable real-time reporting
Financial chiefs can use these actionable results to optimize cash flows.
Engage in Continuous Planning to Keep Cash Flow Optimized
Optimizing cash flow requires financial discipline across organizations. It is critical to increasing resilience against liquidity shocks and economic instability. It also helps in capturing opportunities when economic conditions favor the marketplace. So to achieve this, financial chiefs can do the following things:
- Establish the fundamentals for cash flow management
- Create an organized approach to planning and reviewing the cash flow process
- Address short-term financial gain opportunities
Intelligent and insights-driven cashflow management can help organizations to improve cash flow process efficiency, mitigate risks and provide accurate reporting for strategic planning. These steps create the right ways to optimize the process and grow the business.
