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Journey to Cash Excellence

Special Edition Newsletter April 2022

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For more than two years, CFOs have been challenged to preserve cash amid a global pandemic that created uncertainty and served to wreak havoc on every sector of the economy. As we begin to emerge on the other side of this crisis, businesses can begin to shift their focus from preservation to sustainability – from survival to the next phase of growth. And trends emerging from our members-only peer group, CFO Connect©, indicate a strong desire among members of The CFO Leadership Council to move to sustainable cash excellence.
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McKinsey & Company writes about the critical importance of cash excellence – a concept that outlines a cultural shift for the entire organization, a mindset and systems that support end-to-end cash management. This cultural shift, led by the CEO and CFO, and adopted throughout the organization requires participation from people, processes, and structure. End-to-end cash management involves decisions made by employees at all levels – and so it is only logical that the journey to cash excellence leverages process automation, Machine Learning, and the ability to view and analyze data across systems.

The proliferation of software and solutions in the market today, designed to optimize AR, AP, Inventory, Treasury Management, and decision-making capabilities, is a strong indicator that sustainable cash excellence will remain a priority for CFOs.

Through collaboration with thought leaders in cash management, The CFO Leadership Council compiled this collection of articles to bring you to that next growth phase successfully.

Credit cards: The working capital tool for the digital era

The COVID-19 Pandemic reshaped much of the world of finance. Companies have had to quickly learn to navigate remote payment approvals and shifting fraud techniques. Cash management has become even more important– though remote work makes cash management trickier thanks to labor-intensive physical checks.  Many organizations are moving from checks to electronic payments to help increase efficiency, save money, increase working capital, and reduce costs.

Despite its clunkiness, the check float was a time-honored tool for increasing working capital in pre-COVID times. Using a credit card for working capital is essentially the same concept as the check float: Extend your days payable outstanding and hang on to your cash longer. Credit cards let you do that with much more flexibility and control, and the rebate is a cherry on top. Additionally, card payments have robust security features that make them more secure than many other payment options.

Depending on your costs of borrowing, using a credit card could be less expensive than tapping a credit line, too.
Depending on your costs of borrowing, using a credit card could be less expensive than tapping a credit line, too. With many cards there are no fees or interest charged for the credit extended with the card, unless payment terms are not met, and you can take advantage of early pay discounts.

Partnering with a payments provider who can rely on a robust vendor enrollment team is a wise move as card use becomes more popular. This means you should look for a provider with a team whose sole job is to maximize card acceptance to increase your rebate and make your payment process more efficient.

Globalization has created unprecedented opportunities for companies – small, medium and large – to expand internationally. More companies are venturing into foreign markets, buying and selling goods in places long considered out of reach for all but the largest multinationals. These international ventures often create opportunities for growth, but they can also expose companies to foreign exchange risk. In a world where currencies are volatile and their movements hard to predict, profits can be wiped out in the blink of an eye.

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8 ways payment automation makes cash management better

Cash management has always been important, but it’s certainly gotten a lot more attention in the past two years. When COVID-19 left businesses in a panic, their sights turned to cash.

Overall, cash management can be a huge headache. We’ve seen AP professionals shuttling back and forth from the office to pick up paper invoices and check stock, and AR professionals struggling to figure out how to do their day-to-day work while making sure all checks are deposited to the bank. With this inefficient system, invoices and checks could be sitting for many days before they’re processed, leaving you with little visibility into your payments.

Some finance professionals worry that less check use equals more fraud.
Some finance professionals worry that less check use equals more fraud. In fact, a decrease in check use is a first step toward more effective cash management. Additionally, managing and safeguarding vendor banking data requires a lot of IT resources and staff time. However, payment automators assist with fraud prevention efforts on their customers’ behalf, helping to reduce their exposure and give them back resources.

What are some other reasons to work with a payment automation partner? Benefits may include access to rebates, greater visibility over all of your payments, more control, less time answering inquiries and adjusting payments, and reduction in payment fraud.

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In the dark about global cash? You’re not alone!

5 steps to improve global cash visibility

Global operations make it more challenging for small treasury teams in mid-market companies to handle day-to-day operations efficiently and securely. They struggle to keep an overview on their cash and risk positions. A professional cash management solution can help to overcome these challenges.

In the dark about global cash? You’re not alone!

In the past few years, the number of global mergers and acquisitions has reached an all-time high.
In the past few years, the number of global mergers and acquisitions has reached an all-time high. Hit hard by their company’s growth, Treasurers often lose sight of their global cash. New currencies, global banking structures, regional regulations, disparate processes, and disconnected systems all add complexities to the treasury operations.

Treasury professionals may now have to keep an overview on hundreds of bank accounts with different bank partners, in multiple currencies and in many countries around the world. They need global structures, processes and policies that facilitate efficiency, visibility, control, security, and compliance. And they need technology.

Using simple tools, such as spreadsheets, or disparate solutions to manage complex operations leads to inefficiencies and errors. Cloud-based cash management systems, however, can make it easier to manage complex treasury operations, increasing transparency and control in cash, liquidity, and risk management.

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A New Era in Cash Forecasting

Cash forecasting is meant to drive smarter business decisions in all economic climates. Amid the pandemic, it became even more critical for businesses to accurately assess and anticipate their future cash flows. Many finance teams —empowered by broader treasury digitization and technology breakthroughs — are now embracing new forecasting solutions that use machine learning to harness data and improve confidence.

To see how machine learning can help optimize cash, let’s first take a look at some of the traditional barriers to forecasting success.

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The CFO Leadership Council is a community dedicated to empowering finance leaders to grow and thrive. We provide insights needed to overcome any challenge you may face and meaningful connectivity to a dynamic community of your peers.

What began as a close-knit experiment back in 2006 is now a global community, 2000+ members and 28 chapters strong.  The CFO Leadership Council offers both live & online programs that feature expert panels and interactive sessions that drive meaningful conversation and leadership development. Our collection of leadership development resources contains pragmatic insights and advice sourced directly from our members and industry experts.