54% of CFOs Consider Liquidity and Cash Management a Top Challenge

These are trying times for chief financial officers (CFOs) and other finance professionals. The unpredictable economic impacts unleashed by the pandemic have greatly complicated the task of managing cash flow and working capital.

To cite a few examples, manufacturers have had to quickly secure relationships with new suppliers and shipping companies, financial institutions have had to close their branches and expand their digital banking capabilities, and retailers have had to boost their digital commerce offerings. The execution of such moves almost invariably comes back to company finance leaders.

Today, 54% of CFOs consider liquidity and cash management a top challenge, according to the Corporate Cash Management Playbook, a PYMNTS, Red Hat, Infosys Finacle and Intel collaboration.

Get the report: Corporate Cash Management Playbook: How Digital and Cloud Technology Can Empower CFOs

Forecasting Has Emerged as a Challenge

Although CFOs and corporate treasurers view cash management as a pressing challenge, only a fraction of them are using technology to improve the process. Cash forecasting has in many ways remained unchanged amid the successive waves of digital innovation that have made significant inroads at the corporate level.

But the pandemic has shed light on the pitfalls of using static models. The widespread cash flow shortages that have emerged during the pandemic have made real-time visibility into cash positions more critical than ever. CFOs and corporate treasurers must now contend with a wide range of dynamic conditions and possibilities, such as a trusted supplier going out of business or international freight companies greatly increasing their rates due to high demand. Set-it-and-forget-it strategies simply will not suffice amid current economic conditions.

“In the context of the pandemic, where it has created a new sort of paradigm in terms of working remotely, being able to have a clear, real-time view of what’s happening with your cash flows across multiple banks, multiple businesses, multiple geographies proves to be immensely important,” Rahul Wadhavkar, head of cash management at Infosys Finacle, told PYMNTS. “And we expect this [cash visibility] not only to remain a top priority for treasurers but [also] to gain more attention.”

Leading Technology Providers Offer Holistic Systems

Technological advances in recent years — specifically in cloud computing and APIs — have given rise to a new generation of financial management tools that can effectively leapfrog once-daunting technical hurdles. The pandemic has spotlighted the value of these innovations in keeping funds flowing at a time when finance teams are working remotely and holding the potential to bring new levels of visibility and control over company funds.

Although the adoption of API technology in the corporate banking sector is not new, “the push toward an open-banking model that has been occurring lately is now supporting a more agile and innovative system landscape, leveraging advanced real-time analytics to provide better insights into the customer’s activity and [making it possible] to embed transaction banking functionality seamlessly and securely into smart business automation,” Vincent Caldeira, chief technologist, APAC (FSI), at Red Hat, told PYMNTS.

The new financial management tools allow corporations to manage multiple payment flows from wide-ranging sources, including from digital channels such as eCommerce sites and platforms. They can enable real-time payment and cross-border transactions while also managing foreign exchange (FX) risks. Payment security is also a vital component of digital cash management solutions, with companies deploying artificial intelligence (AI) and other advanced machine learning (ML) to detect and counter fraud threats that have proliferated as more commerce has moved online in real time.

Leading technology providers offer these services not as stand-alone applications, but as holistic systems that can be easily integrated into enterprise resource planning (ERP) software.