Only 14% of CFOs Are Using Technology for Working Capital Management

The uncertainty generated by the COVID-19 pandemic weighs especially heavy on treasurers and chief financial officers (CFOs), because they are responsible for ensuring that companies have the liquidity to meet daily obligations and the working capital to respond to business challenges and opportunities.

However, although digital technology has made significant inroads at the corporate level, cash forecasting has in many ways remained unchanged. In fact, only 14% of CFOs are using technology for working capital management, according to the Corporate Cash Management Playbook, a PYMNTS collaboration with Red Hat, Infosys Finacle and Intel.

Also see: Corporate Cash Management Playbook

“For many corporate clients … their technology environments are just as complicated as banks’ technology environments,” Rahul Wadhavkar, head of cash management at Infosys Finacle, told PYMNTS. “So for them to be able to streamline everything … and efficiently consume key data from [one or] multiple banks is challenging. So [this is one reason] corporates have struggled to create that end-to-end digitized environment.”

A Need for Real-Time Visibility and Control

The need to digitize is urgent, though. More than ever, companies must be able to maneuver quickly to find new suppliers that may require payment upfront — and their own customers are seeking greater flexibility regarding when and how they pay. Firms must also be able to find new ways to market and distribute services that require digital and cross-border payment capabilities.

CFOs and other financial decision-makers need real-time visibility and control over a growing array of banking accounts — and powerful tools that can help them make projections in a time of uncertainty.

Cash forecasting and collection have been particularly affected by the push toward open banking.

Advanced analytics, including machine learning (ML), allow “corporate treasuries to identify monthly cash flow patterns and seasonal and cyclical variations dynamically instead of simply relying on historical data patterns,” Vincent Caldeira, chief technologist, Asia-Pacific (financial services industry) at Red Hat, told PYMNTS.

“In the domain of cash collection,” he added, “predictive algorithms trained to identify potential settlement risk based on past payment behavior from clients allow corporate treasurers to identify, manage and mitigate these risks earlier to optimize their cash conversion cycles.”

The New Generation of Financial Management Tools

The new generation of financial management tools allows corporations to manage multiple payment flows from wide-ranging sources. They can also enable real-time payment and cross-border transactions while also minding currency risks. Payment security is also a vital component of digital cash management solutions, with companies deploying artificial intelligence (AI) and other advanced machine learning to detect and counter fraud.

Leading technology providers offer these services not as standalone applications, but as holistic systems that companies easily integrate into their enterprise resource planning (ERP) software.

“Today, many corporations actually wait to get cash management or liquidity reports from their banks — and those reports may come in once a day, maybe once a week, depending on what your arrangement is with the bank,” said Infosys Finacle’s Wadhavkar. “Now, with [application programming interface] technology and dedicated information reporting functions, these real-time reports with crucial data points could be seamlessly made available on call.”