Cash Flow Reporting: 3 Steps for Success

Written by Trovata Team
May 10, 2021

Mistakes with cash flow reporting and cash flow statements are a significant reason for restatements of the financials public companies file. According to Audit Analytics, the percentage of companies that filed for restatements due to anticipated changes in financial results increased from 16% in 2018 to 22% in 2020. 

The main issues raised with cash flow reporting focused on ‘lack of details,’ not outright non-compliance. Here, ‘lack of details’ refers to challenges with capturing data. For example, an enterprise with multiple transaction channels servicing customers in different locations might overlook the need to classify transactions according to geography. Although maintaining this level of data granularity may seem insignificant, mislabeling classifications may lead to restating cash flow reports and financial penalties. 

Another challenge faced by financial controllers is data aggregation. In most cases, the original data is spread across multiple banks and needs to be normalized. Thus, a lot of manual effort is required to consolidate, standardize the data to differentiate between cash and non-cash transactions, and categorize transactions under operating, financing, and investing. 

The 3 Steps to Successfully Developing Accurate Cash Flow Reports

Manual cash flow reporting methods increase the hours required to manage data, leaving little time for analysis.  

  1. Leverage Automation Technology – Automating repetitive tasks is the first step to eliminating the level of error associated with manual reporting and spreadsheets. Opening banking APIs have introduced technology that can automate data collection from multiple accounts and matching payments. Integrating advanced automation technologies like artificial intelligence (AI) and machine learning (ML) allows professionals to focus on strategic analysis of reports instead of number crunching.

Automating data analytics also saves the time and resources spent analyzing large data sets. These digital tools for cash management increase leadership’s access to data and boost their decision-making speed.

  1. Streamline Data Collection – Challenges with data collection increase exponentially with the number of accounts and transactions included in a cash flow report. Automated cash management programs leverage APIs to bring all of your cash data into one place. Creating a single source of truth for transactions not only saves time but helps to ensure that the entire organization is working off of the sat data set.

Open banking APIs provide the technological tools to connect the dots across multiple accounts in different locations, serving an enterprise’s diverse operational requirements. APIs enable the democratization of data. When financial professionals are released from manual duties, they are free to explore and analyze their cash data without penalty. 

  1. Embrace Digital Transformation – The finance sector is famous for the amount of data sets it produces, and digitizing these big data sets and utilizing digital technology will reduce the human effort and resources expended in creating cash flows. Although most treasury and accounting departments rely on some form of digitization to collate data, a comprehensive implementation digitizes the entire cash flow reporting process. 

Digital transformation tools such as cash management software are equipped with open banking APIs, machine learning, and artificial intelligence to simplify the management process. Using digital transformation tools backed by the cloud ensures flexibility regardless of the amount of data sets your transactions generate. 

Turn-Key Data Management Tools

Turn-key data management systems provide controllers with the digital tools to support automation and streamline the data collection and analytics process. Trovata combines APIs enabled data aggregation with AI and machine learning for data analytics to provide a single source of truth for cash data.
Learn more about how automation can streamline the work of the accounting department by downloading our “Accounting Automation Guide.”

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