3 Tips to Improve Your Cash Flow Analysis

Written by Trovata Team
April 2, 2021

Challenges of Cash Flow Analysis 

Everyone knows that cash is king and that cash flow analysis is a mission-critical element of maintaining financial health. Yet, despite the importance of cash positioning and reporting, accurate and timely analysis eludes many finance professionals.

Today’s finance teams operate with limited access to real-time data and are often stuck chasing down transactions from multiple bank portals. The result? Cash flow analysis is a lengthy, highly manual process that is extremely vulnerable to human error. These inefficiencies of process lead to flawed data, insufficient information about funds availability and ultimately reduces leadership’s ability to make quick business financial decisions.

However, digital transformation provides finance professionals with a new toolkit that enables streamlined access to data, automated report generation, and, most importantly, reduced time from analysis to decision making.

How Cash Flow Analysis Technology can Help

The number one reason for business failure today is insufficient cash flow. Proper planning and managing funds with cash flow analysis technology can make a material difference in how your business can operate.

Here’s some examples of the technology used during a Cash Flow Analysis sequence: 

  • Automation- While batch pulling ACH transactions can take days, automated cash management tools reporting and analysis lags only by keystrokes. 
  • Application Programming Interfaces (APIs) With new fintech companies offering direct API connections to banks, that means your days of getting trapped in the revolving door of bank portals are over. Direct APIs provide a digital roadway between banks and cash management platforms, providing a steady stream of real-time, down-to-the-second data. 
  • Artificial Intelligence and Machine Learning (AI / ML): Once that transactional data rolls into the platform from the API, Artificial Intelligence and Machine Learning (AI/ML) algorithms go to work categorizing the data. The result is standardized and aggregated cash data on-demand. 
  • Natural Language Search and Fast Processing Power: Finance professionals are then free to tag, sort, search and use their data at will to generate custom and dynamic reports within milliseconds. 

Automation and cash flow analysis technology empowers finance professionals to pivot away from micromanaging a spreadsheet to focus their talents on real analysis. With the right cash flow analysis tech stack, businesses earn a strategic edge by giving finance professionals the ability to explore and analyze their data without time penalties or the fear of ruining a spreadsheet. 

In a recent webinar, “Three Ways Finance Leaders Align Cash Flow Forecasting and Scenario Planning,” Trovata CEO and Founder Brett Turner discussed the effect of digital transformation on finance data collection and analysis.” You have to be on a path to drive automation, or otherwise, you’re gonna start to fall behind. And that’s never a good situation.”

3 Tips for Cash Flow Analysis

If you’re a financial leader in a business who is considering finding and investing in cash flow analysis technology, here’s three tips on how you should get prepared to change your daily processes.

1. Limit Reliance on Spreadsheets

Tools like Excel have proven themselves to be extremely powerful, but the tool is losing its appeal when it comes to cash management. Spreadsheets now create a potential liability where one inaccurate cell or formula could completely derail a report. Plus, they are prone to human error and require massive manual input, costing business professionals valuable time. Ever seen a #REF! Error? Then you likely know that sinking feeling that you need to spend more manual time fixing the sheet.

In the past, the finance department was limited by Excel and a laundry list of accounts. Leaving them only able to generate reports on a monthly or even quarterly basis. By limiting reliance on spreadsheets and adopting a digital tool kit, finance departments can turn around reports daily, even hourly. By leveraging AI and ML, finance professionals can eliminate the lag typically associated with financial reporting.

2. Stay on Track – What Should Be Monitored?

To have an overall view of a business’s cash flow, several components need to be included. A good analysis of these areas will narrow or even close the cash-flow gap. Some critical areas to track include:

  • Accounts receivable: Sales that have been made but payment has not been collected. Without accounting for negative cash flow, it is impossible to have accurate real-time access to capital.
  • Inventory: Properly planning and managing inventory as it is related to managing your cash flow. For example, an excessive inventory amount uses cash flow that may be needed for other liabilities.

Accounts payable: Amount owed to suppliers that will need to be paid generally within 30-90 days.

3. Broaden the Scope of Cash Flow Analysis with Scenario Planning

Scenarios are imperative to cash flow forecasting. In the past, the finance department didn’t have the time or resources to explore scenario planning. With automated cash management tools, finance professionals are free to explore unique, even black swan scenarios. This means that they can not only manage cash flow, but set safeguards and understand the risk the business faces in the unlikely event of once in a lifetime event. Now with the unlocked ability to dig into data needs and churn out an infinite number of forecasting scenarios, financial managers can leverage scenario plans to make better informed financial decisions.

Bottom Line

Your company stakeholders want a full image of the company’s financial position. They want accurate reports, and they want them on demand. While this can be difficult to accomplish using the standard financial tool kit, digital transformation offers finance professionals a new and better way forward. By leveraging API and AI technology, finance professionals can provide the quality data needed to make fast and fully informed financial decisions.

Automated Cash Management tools provide finance professionals with:

· Instant access to normalized transactional data

· A consolidated cash position

· The ability to easily bucket and search for transactions

· Custom, automated cash reports

· Access to historical data

· The ability to drill down and see transaction details

Interested in learning more about how automation is reshaping the way finance professionals access and leverage cash data? Click here to watch our pre-recorded webinar “Three Ways Finance Leaders Align Cash Flow Forecasting and Scenario Planning” no strings (or forms) attached. 

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