Leveraging Automation to Optimize Cash Management

Written by Keegan Chamberlin
May 14, 2021

Challenges with cash management and cash flow reporting are usually due to data collation and analytics. The process finance professionals often use to capture transactional data relies heavily on repetitive manual effort. Human errors abound with most repetitive activities, such as overlooking unstructured data, tampering with Excel formulas, and forgetting data sets. This can be solved with cash management automation processes.

In the early hours of May 12, 2021, Quintessentially, a concierge company in the UK, announced it had made accounting errors. This announcement came after auditors had warned that the enterprise faced liquidity problems and material uncertainty.

Like a majority of the 22% of companies that had to file cash flow restatements in 2020, Quintessentially’s accounting errors were due to inaccuracies in capturing data for cash flow reporting.

The effect of inadequate data collection also impacts other interrelated activities, such as the quality of cash forecasts and the ability to implement standardization and industry-specific regulatory policies. Thus, devising a means to eliminate the manual data collation process and analytics solves one of the significant problems you are likely to face with cash management.

Automating Cash Management Processes with Digital Transformation Technology

The application of digital transformation technologies to automate tasks has predominantly been applied across the manufacturing industry as defined by Industry 4.0 business models. The finance and treasury industry can also leverage digital transformation to reduce errors and simplify the cash management process. 

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Digital transformation has introduced advancements that take automation to the next level with the following solutions: 

  • Open Banking APIs – Enterprises utilizing multiple bank accounts and financial gateways to process payments can integrate transactions from multiple accounts into a singular platform. The singular platform serves as a source-of-truth and visualization solution to capture cross-currency and multiplatform transactions in real-time. Finally, APIs fully automate the process of capturing data from financial transactions across all your payment. 

  • Machine Learning and Artificial Intelligence – Gaining insight from captured data is the foundation for accurate cash forecasting, determining your enterprise’s cash position, and automating the application of predictive analytics. Automated cash management systems utilize machine learning to analyze data telemetries to provide data-driven insight.

  • Digitization Tools – Despite the widespread use of digital technology to process financial transactions, some transactions occur through traditional manual processes. These transactions account for a large portion of the unstructured data finance professionals overlook when developing cash flow reports or handling cash management duties. Digitization tools ensure recorded transactions can be digitized and integrated into cash flow reports.

  • Scalable Cloud Resources – Financial transactions generate large data sets continuously in real-time. Capturing the context surrounding financial transactions and related data plays a vital role in determining if a transaction falls under operating, investing, or financing activities. A cash management system with scalable resources must store and analyze data sets generated from increasing transactions. Cloud-based cash management systems provide the scalability to efficiently manage the vast financial data sets an enterprise produces.

The Benefits of Automating Cash Management

Cash management errors can lead to making erroneous transactions which can be labeled as fraud. In the case of Quintessentially, the enterprise paid distributions to some of its shareholders for three years based on inaccurate calculations. Errors in determining an enterprise’s cash position can lead to liquidity issues and bankruptcy. 

Automating cash management reduces the possibility of accounting errors, as well as other benefits such as: 

  1. Reduced Manual Labor and Increased Efficiency – Treasury departments are often characterized by limited working personnel functioning on a tight budget to provide insight into an enterprise’s finances. Automating the cash management process ensures small treasury departments are not overworked to the point of making consistent errors. Automating the data collection process also speeds up cash reporting thus, increasing the efficiency levels of treasury departments.

  2. Real-time Insight – The ability to gain insight into cash positions and make accurate forecasts in real-time enhances the decision-making abilities of C-level managers. Automating data capture and analysis provides real-time insight and is one of the selling points of cash management systems. Finance professionals can also leverage the real-time insight automating cash management provides to convince stakeholders to consider purchasing a digital transformation solution. 

  3. Ensures Business Continuity – Knowledge of the cash position of an enterprise is crucial in financial decision-making. Inaccurate cash management means a business is likely to over-extend itself financially, which leaves it in a vulnerable position. Automated cash management tracks cash in transit, deposited cash, and the status of cash holdings to ensure a business can continue its operations from a healthy perspective financially.

  4. Reduced Cost – Manual data collation processes are not only time-consuming, labor-intensive tasks, but they also consume scarce resources. Integrating automation to minimize the effects of manual cash management leads to substantial savings as the ROI includes efficiency, less labor expenditure, and increased accuracy. 

Free up valuable time by employing an automated cash management platform. Trovata’s direct API connections make onboarding quick and easy.

Ready to take the first step toward automation? Download our “Digital Transformation Implementation Checklist for Finance Professionals” to get started. 

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