Understanding the Corporate Cash Cycle and Finding the Right Cash Management Solutions

One of the most important and integral parts of any business is cash management. A business, no matter what its scale is, cannot function without proper cash management solutions. Businesses need to keep a ledger, digital or otherwise, where every transaction is documented in real-time.

Unless a business organization knows where and how its cash flows, it cannot inch towards success. This is where we need to talk about how cash management is more than just gauging and dealing with profits and losses. Cash management is more than just these two components. It is about understanding the resources that one has at its disposal, allocating cash for the same and predicting the returns.

This too is a simple textbook definition of cash management when it comes to business or banks. Over the length and breadth of this article, we shall go over the details of corporate cash management and also shed light on how a business can find the right cash management solutions.

Who Handles the Task of Cash Management at an Organization?

Normally, the people who are tasked with handling corporate cash management are known as the treasurers and CFOs. However, it shall be inane to think that these professionals handle the magnanimous job of cash management all by their own. They have a myriad of tools and software at their disposal that make the task easy.

These tools and software services have essentially come handy during the pandemic, more than ever. The CFOs and the treasurers can turn to these digital tools to manage the cash flow of the organization easily and without a hassle.

However, on the flip side, this hoard of tools has also made it quite difficult for the professionals to choose the right ones. There are options galore, and this has led to confusion too. However, companies are now attending various webinars and conferences that talk about cash management tools and software and help them to choose the right ones.

Components of the Corporate Cash Cycle:

Now that we have spoken at length about the cash flow in an organization and also discussed about the roles of CFOs and treasurers, we need to turn our attention towards the components that drive the corporate cycle.

One of the major components of the cash cycle is that of working capital. People who have studied finance shall know about the term already. However, for the uninitiated, working capital is the short-term assets and short-term liabilities.

Assets include a number of things under its umbrella term. For instance, cash on hand, inventory and accounts receivable, are all part of assets. It is exceedingly important to keep track of the working capital since if a company’s liabilities exceed the assets, it could go bankrupt. The company might find it daunting to pay back to its creditors.

Products that Help Track the Cash Flow:

There are several cash management solutions that a company can seek help from to keep up with the critical task of cash management.

For instance, the treasurers and CFOs can use ERPs, several treasury management systems, electronic and digital ledgers, electronic invoices, trades, finance, reconciliations and a slew of other products.

If one were to go back in history, it could be said that banks are adept in providing these cash management solutions. In fact, several fintechs have started rearing their heads, thus, changing the corporate cash cycle.

There are more options when it comes to vendors to choose from, and the solutions have become all the more comprehensive. Banks and fintechs are no longer only associated with atm services. They also provide platforms for cash forecasting to manage their cash effectively.

Aiding the Mid-Tier Banks to Stay Afloat and Keep Up:

Large financial institutions might not find it difficult to keep up with the changing cash management landscape. They have the budget and resources to invest in vital cash management solutions, as mentioned in the previous section.

However, the same is not true for mid-tier banks. Mid-tier banks do not necessarily have the means to develop their own cash management tools.

And this where the already available cash management tools and software come handy. These tools and platforms cost less and mid-tier banks can seek help from them to manage their cash flow.

Summing It Up!

Cash management is an integral part of any business venture. In fact, it is not just business enterprises that need to use effective cash management solutions. Banks and other mid-tier financial institutions also need to collaborate with such financial solutions and platforms for effective cash management.

Understanding how and where cash flows is imperative for a business to thrive and become successful. We have discussed all that in length over the course of the article. Hence, in a nutshell, the cash management solutions that we have enlisted in the article here must be sought after by organizations and mid-tier financial institutions to stay afloat, especially during the pandemic.