Global Cash Visibility: Basics, Challenges, Best Practices - Happay (2024)

What is global cash visibility?

“The more a business owner knows about their cash flow, the more empowered they become.”

—Nick Chandi, ForwardAI CEO

Understanding and knowing your cash position is vital for any business. If you have cash in numerous currencies and countries, it makes perfect sense to keep track of it efficiently. The ability to see your cash position at any time is called global cash visibility.

Global cash visibility is in the larger sense of its meaning, but in the case of companies with a worldwide presence, the intention is quite literal.

Achieving global cash visibility is the first step toward understanding your company’s cash flow. While this knowledge is advantageous to corporates in many ways, corporate treasurers benefit immensely from it.

Liquidity management improves (as they can access and control cash easily), and so does risk management. Treasurers can also make well-informed decisions about the deployment of their funds.

Studies say that 70% of enterprises have daily cash flow visibility (real-time cash visibility) of their funds. The other 30% do not have any insights about possible challenges or opportunities ahead of them.

Read also – Petty Cash Management

The basics of global cash visibility

To understand the concept of global cash visibility, it is essential to recognize the relevance of cash in enterprises. In this context, any asset that may be converted to cash within three months is referred to as cash. So, accounts receivables, cash-in-hand, cash-at-bank, traveler’s cheques, and cryptocurrency qualify as cash.

You must view the global cash position from a centralized location for cash visibility. However, the mere fact that this category includes traveler’s cheques and cheques makes this virtually impossible. Practically speaking, 100% global cash visibility is hard to achieve.

Then, what is the solution?

The only way to sort through this problem is to simplify your cash management process so it takes minimal effort to see the global cash position. Further, technology can be a great aid in helping you achieve this position. It keeps human errors to a bare minimum while improving your efficiency.

79% of respondents in a survey conducted by IT2 felt that they must improve the visibility and mobility of their cash

Read also – What Is Spend Management?

Is achieving 100% cash visibility possible?

It is common to see corporates in multiple countries having multiple bank accounts for their operations. However, global cash visibility has become critical for corporate treasurers for various reasons such as:

• The need to create meaningful forecasts
• Understanding and mitigating foreign exchange risk
• Need to make prudent investment decisions

According to research by Kyriba, less than six out of every ten treasurers have more than 80% global cash visibility. So, what is preventing corporates from accessing such visibility?

The biggest challenges to 100% global cash visibility are accessing the right technology, the organization’s geographical footprint, and a centralized treasury team.

“Entrepreneurs believe that profits matter the most in any new enterprise. But profit is secondary; cash flow matters the most.” – Peter Drucker

The importance of global cash visibility

1. Real-time cash positions

Real-time cash visibility can contribute to efficiencies across functions. Imagine being able to access your company’s financial position at any time. You can monitor bank accounts, access the data, and manage payments, investments, credit lines, and all financial transactions without stepping out of your office.

Further, consolidated data in a centralized location affords corporate treasurers access to timely and insightful cash flow, foreign exchange risk, and other inflow and outflow reports.

2. Risk mitigation and controls

The quest for global cash visibility also exposes enterprises to numerous forms of data theft. However, cloud-based automated cash management systems offer safety and security measures to ensure that your data remains secure.

Centralized visibility allows treasury technologies and treasuries to track users’ activities across the organization. While this takes care of treasury risk, technologies or automated systems also ensure that data is accessible centrally, ensuring that you stay in control of the payment processes.

3. Understand treasury cash flows

Understanding your business’s cash flows is vital for better business decisions. With global cash visibility, you gain robust insights into idle cash or cash leakages. It also helps you to understand the problems with your existing approach (if any) and work on better strategies to use cash efficiently.

4. Foundation for improvements

Most importantly, a cash or treasury management system regularizes and streamlines your cash management processes and offers consistent and insightful reports. Such reports provide more practical and accurate comparisons against past performances and competitors.

It also gives you what you need to plan and optimize your liquidity for the future. Cash management is based on accounts payable and accounts receivables. Tracking your global cash position allows you to prepare for payments.

Read more – 10 Best Accounts Payable Software

How to improve global cash visibility?

As a general rule of thumb, the cash visibility across the organization lowers when the organizational Structure becomes more complex. It is not uncommon to see corporations developing banking relationships with several banks within and outside the country.

Apart from complications that arise from these scenarios, there is also the fact that enterprises often use software applications that do not integrate very well with each other. These factors can surely complicate global cash visibility.

So, let us look at how we can improve visibility.

1. Centralized systems

Centralized cash management systems can be immensely helpful to enterprises in liquidity management and better control of cash flows. Such systems also help companies to maximize returns on investments while warning them of possible risks in the future.

2. Step away from manual workflows

Traditional and manual workflows are cumbersome and tedious. In some cases, treasurers use treasury management systems forcing them to download statements manually. These must further be imported to your business’s ERP or accounting systems used by your business.

In the bargain, you are losing precious time that can be used for analyzing and better decision-making. Cash management systems integrate effortlessly with your bank portals, accounting software, and other applications, ensuring you

• Consolidate information faster
• Aggregate bank information easily
• Eliminate or reduce manual work

3. Eliminate physical payment methods

Apart from automating, one of the ways to improve global cash visibility is to eliminate physical payment methods as much as possible.

Where it is impossible to eliminate them completely, limit the number of payment methods. Consider opting for cards that can link to your accounting software. It eliminates the manual reconciliation process and allows you to monitor the activity online.

4. Consider integration methods

You can improve global cash visibility by considering solutions integrating bank accounts with your existing ERP and TMS (treasury management systems)systems.

The software solution pulls and consolidates data from your system and bank portals to give your real-time cash position. You can also use reporting tools to collate your data to provide a customized dashboard with relevant and visually appealing reports.

Read also – What is Expense Management?

Global cash visibility: CMS and TMS (cash and treasury management systems)

1. Cash management system

Generally used to track, report, and forecast cash flows, cash management systems can be employed across companies. Irrespective of the number of branches within or outside the country, currencies used, and multiple bank accounts, these solutions are highly effective as they integrate well with your existing software applications.

Custom cash management systems may be designed and implemented in a 6–12-month time frame. The time depends on the design’s complexity and the business’s scale. Further, the average cost of building such cash management software varies between $150,000 to $400,000 (depending on the complexity of the software).

2. Treasury management system

Enterprises can better control and manage their liquidity, risk, and capital by promising a more significant amount of global cash visibility. Enterprises employ TMS or treasury technology systems to automate repetitive and manual processes in the corporate treasury. The system allows better control over bank accounts and helps stay compliant while helping in risk management.

The average cost of building custom treasury management systems ranges from $200K to $400K. The amount varies based on the kind of software, features, and scale of implementation.

Read also – Expense Management Automation

Cash Management versus Treasury Management

Challenges of global cash visibility

1. Complex organizational structure

It is common to see organizations struggling with complex structures that have developed over time. Such complex organizational structures are not the most supportive scenarios for cash visibility. Let us take the example of a merger.

When two companies merge, there are two or more sets of processes, payment systems, workflows, etc. If these companies are in different countries, then the merger makes things much more complex for treasury teams.

A centrally located treasurer must wait on information received at various times and in varying formats, process it, and then analyze it. Such workflows are inefficient and a significant hindrance to global cash visibility.

2. Bank accounts and visibility

Most modern and global businesses face a common disorder of operating many bank accounts. An enormous task is to overview all the bank accounts and track the transactions and balances.

This challenge can quickly become overwhelming if the businesses have multiple subsidiaries and work in several countries. It becomes an additional burden to ensure that treasurers stay on top of the organization’s cash position. Considering the amount of work involved, this is an administrative job all by itself.

3. Imbalances in working capital

Working capital imbalances are a common problem for companies with subsidiaries. When the cash is decentralized, there are greater chances of an imbalance in the working capital.

As the treasury head of a group of companies, you are hard-pressed to find a middle ground. Between allowing subsidiaries to hoard cash (with their banks) and those attempting to negotiate loans (with local banks) the task is challenging.

The challenge for treasurers is liquidity management, as you must investigate overall expenses thoroughly to identify the optimal allocation.

4. Budget leaks

One of the more significant challenges with global cash visibility is that treasurers bear the consequences of subsidiaries working in isolation. Information and other details in silos work against the goal of cash visibility.

Individual business decisions by subsidiaries, such as foreign exchange transactions (cost of currency exchange can vary based on your positions and several other factors), can seriously affect the operational budget devised by the treasury.

Read also – How to Track Your Business Expenses?

Best practices for global cash visibility

Treasurers will agree that managing cash is no mean feat! Their role is crucial in devising effective strategies for global cash visibility. Treasury heads and teams must be proactive, flexible, and highly responsive to take advantage of opportunities and effective risk management.

Here are a few best practices to follow for global cash visibility.

1. Enforce better control over business operations

Inefficiencies in your business workflows are a roadblock to visibility over your cash positions. Such inefficiencies may arise for several reasons.

• How many bank accounts does your business have?
• Have you paid attention to the number of software systems you have?
• Are all your processes completely automated? What is the extent of manual processes in your business?

Per a survey, 80% of treasury teams confirmed using spreadsheets for forecasting. The task of aggregating data is so time-consuming that cash-related information is not relevant anymore. While these are not ineffective as a tool, better automation tools can lead to error-free and efficient forecasting.

2. Improve your focus on forecasting

Corporate treasurers must leave data collection and aggregation to focus on the forecasting aspect of their job. As one of the most critical aspects of the treasury function, forecasting is only possible when relevant data is available in real time.

Real-time visibility becomes more relevant as the company’s size and presence increase and expand. With such large organizations, fragmented systems that struggle with clarity of the cash position are standard.

Corporate treasuries must have access to a centralized view (certainly no silos!) of the entire organization’s cash position (irrespective of geography, currency, and bank). It allows treasury teams to stay proactive, take advantage of opportunities well ahead, and take evasive action for perceived risks.

3. Visibility is key

Numerous software systems and platforms can be custom designed to suit your business requirements. With global cash visibility becoming non-negotiable, it is time to consider ways to scale this challenge. The goal for organizations must be to get visibility of

• All bank accounts
• Payments processes (business and its subsidiaries)
• Investments (irrespective of the currency, geography, and bank)
• All details of foreign exchange transactions

Cash visibility will develop the capability to match funds with the need accurately and quickly. Barely seven out of ten businesses have daily or real-time visibility of their funds in their bank accounts. For organizations and their treasury teams, real-time visibility equals flexibility.

4. Find ways to maximize liquidity

Risks appear unannounced, and, in such times, liquidity is what matters for businesses. However, without visibility, treasurers can only guess if the liquidity situation will be adequate. Further, since the risk is unexpected and has the potential to multiply, firms must focus on getting a 360-degree view of their cash position.

In a study, 69 percent of treasurers felt that the growing importance of cash and liquidity had elevated the treasurer’s role into a more strategic one. With better visibility comes the ability to take advantage of opportunities, thereby surpassing competitors.

Read also – Top 7 Expense Management Challenges

Conclusion

In conclusion, it is safe to say that technology holds the key to better global cash visibility. While this seems like the ideal first step, it is better to focus on your business’s internal workflows and begin to work on a centralized treasury.

Further, you must understand that there is no single solution to this. Begin by unifying your treasury operations and ultimately consider an integrated and customized treasury management system.

FAQs

1. What is cash visibility?

Cash visibility is monitoring your organization’s cash (or cashable assets). The ability stems from having a unified and centralized treasury with a 360-degree view of the bank accounts and all other business operations (global or otherwise).

2. What are global cash operations?

Global cash operations are the ability to manage and use business cash efficiently worldwide. Based on the presence of the organization and the extent of operations, a centralized treasury manages and tracks the movement, usage, and availability of cash.

3. What are the big three of cash management?

The big three of cash management are inventory, accounts payable, and accounts receivables. In combination and working together, these aspects of the organization help to keep the cash flow at an ideal level.

4. What is a good indicator of cash flow?

Both actual sales and pipeline sales are good indicators of cash flow.