An Introduction to Cash Flow Management

14th Jun 2021
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CFOs and Finance Directors are known for keeping a watchful eye on indicators of potential risks and nuanced signals of what might lie ahead when managing cash flow. However, it comes as no surprise that the impact of Covid-19 last year caught CFOs and Finance Directors off-guard.

The pandemic magnified the importance of finance teams looking forwards to maintain business stability. But good cash flow management will always be a vital part of a business’s strategic plan to adapt and adjust to the changing economy.

It is crucial for CFOs and Finance Directors to be able to give a clear view of what cash is coming in and out of the business over the next week, month or year, in order to continue to predict future cash positions. Up-to-date financial data is a fundamental part of successfully predicting financial health over time.

To prevent setbacks in cash flow management, CFOs and Finance Directors need to find a software solution that supports them as they try to think ahead and plan for the future. They need technology that will help to them to spot problems and opportunities, track business growth and ensure their finance team are leading the way in steering their organisation for success.

What is cash flow management?

Let’s start off with the basics. Cash flow management is the process of tracking how much money is coming in and out of your business. It is a term used to describe changes in how much money your business has from one point to another.

Think of cash flow management as a set of balancing scales or a seesaw where one side shows money coming in and the other side with money going out. If more money is going out of a business than coming in, this will tip the scales and reduce the side showing money coming in.

Finance teams need to ensure that the incoming side is always larger than the outgoings so that the business has enough money to pay overheads, suppliers and employees – as well as having enough left over for future business plan investments.

Why is good cash flow management important?

Simply put, maintaining good cash flow is to increase the amount of money coming into the business, and reduce the amount going out.

A seemingly straightforward strategy, getting it right has a huge impact as it allows finance teams to predict how much money will be available to the business in the future. It also helps identify how much money is required to cover debts such as paying employees and suppliers on time.

CFOs and Finance Directors need to be aware of potential pitfalls so they can prevent business outgoings from becoming greater than money coming into the business through sales and financing activities. Keeping track of cash flow helps to spot trends and using forecasting can prepare for future changes, tackling any cash flow problems in good time.

How can Cloud technology help improve cash flow?

The past year saw CFOs and Finance Directors stepping up into a remit more like the COO to weather the storms, report valuable insights and provide strategies to keep their businesses afloat.

Making the right technology decisions will create a finance and accounting platform that embraces an uncertain world and gives CFOs and Finance Directors choices and new ways of reporting and forecasting that will support their vital work. There will also be numerous other benefits, such as significantly lowering the cost base.

Moving to and integrating a connected Cloud strategy is fast becoming the first choice for positive digital disruption. It removes capital expenditure associated with legacy purchases and eliminates the headache of dated infrastructure.

The Cloud gives authorised users real-time and mobile access to all financial data, streamlining budget preparation and reporting. Budget holders can see a single version of the truth and focus on what’s important – value-add analysis.  This is becoming increasingly important for finance teams to ensure they are at the forefront of strategic planning and business decisions.

Here’s how Cloud technology can benefit your cash flow management process…

Bring your finance team to the forefront of strategy

Influence business decisions with a clear understanding of where your organisation is headed, having facts to back strategy plans.

Identify potential shortfalls in advance

Get one step ahead by forecasting where your cash flow will be this time next week, month or year, allowing the business to adjust, plan and adapt.

Save time on manual processes

No longer spend hours manipulating financial data to get it to work for you – get full visibility quickly and easily.

Import data from various sources

Produce cash flow forecasts in both numerical and graphical formats, analysed by inflow and outflow categories relevant to your business.

Explore potential scenarios

Ask key financial questions and explore what will and won’t work for your business by building ‘what if’ scenarios and modelling impacts.

Grow your business

Use cash flow forecasting to make the right decisions to improve your growth and help your business succeed.

Share the outcome

Instantly share results and numbers with C-suite and Board members directly via a browser.

 

Take the next steps…

Forecasting, credit control, risk analysis and access to finance are all essential for maintaining a healthy cash flow. Reimagine your finance team with a solution that will help you get ready for tomorrow.

Good cash flow management through Cloud software allows you to spot problems, track business growth and drive success - ensuring the finance team leads the way in your organisation’s growth.

As we all continue to face one of the biggest economic challenges of our generation, Cloud Financials accounting and financial management software is here to help CFOs and Finance Directors understand, predict and weather the storms ahead, from an informed position. Discover more about Cloud Financials.