What if you were able to access capital tied up in your company’s day-to-day operations? Could that cash help expand your business, pay off debt obligations, or make distributions to owners?
Electronic transactions can provide you with opportunities to lower capital costs through smart fiscal planning, timely cash movement, and integration of your operational and financial systems. You’ll have more control over short-term operating cash flow and funding for strategic growth, reducing your liquidity needs and boosting your returns on capital.
Manage your cash flow effectively with these 10 steps.
1. Link your capital strategy and long-term goals.
Consider your business plans for the next three to five years when developing your capital strategy as this will help you set goals for your weighted average cost of capital, debt/equity mix, and funding sources.
2. Constructively manage your working capital.
Tighten up on collections to pare down your Days Sales Outstanding (DSO). Stretch your accounts payable for greater Days Payable Outstanding (DPO) and minimize inventory for lower Days Sales in Inventory (DSI). With the latest integrated payables workflow and electronic payment capabilities, you can heighten visibility, improve real-time data availability, and strengthen controls at reduced transaction costs.
3. Update your investment strategy.
Rethink policies and goals that shape your investment decisions—from cash flow strategies to equipment purchases timing—and examine them against the current economic climate. Build a team able to maintain your investment strategy and capable of making decisions based on liquidity.
4. Invest in reliable financial systems.
Cash management strategies are only as good as your financial system, which should provide you with:
- A consolidated and timely picture of money from all sources in all your accounts.
- Customizable views offering ways to manage and control your cash flow.
- Advanced capital planning capabilities.
5. Make payments electronically with just-in-time technology.
Hold on to cash longer by making one-time and recurring payments electronically through same-day ACH and wire transfers. Train your staff to manage funds so that payments are released at the last possible moment without being late.
Primary benefits of receiving payments via electronic payment methods1
- Speed of settlement 50%
- Straight-through processing to accounts payable or accounts receivable and general ledger 31%
- Improved cash forecasting 30%
- Improved matching for cash application 27%
- Improved supplier/customer relations 26%
6. Reduce your capital needs with better cash flow forecasts.
Estimate your business’s future operating costs—paying close attention to seasonal and cyclical cash flow patterns—so that you can invest in growth without running low on capital. Generate financial and cash flow reports daily in order to maintain a sense of your company’s working capital requirements and allocate funds accordingly.
7. Collectively manage all your accounts.
Find out which of your accounts have surplus capital and move it to where it’s needed. Consolidating funds from multiple sources prevents excess cash from building up in unproductive accounts and reduces your need for a line of credit.
8. Upgrade your cash management software.
Advanced cash management technology will enable your staff to complete financial tasks faster. It can also be used to integrate your receivables data from multiple sources for timely posting and automated reconcilement.
9. Collect your financial data for predictive modeling.
Electronic payments create data footprints, and you can use this digital information for internal accounting, reporting, and predictive modeling of your capital needs and its applications.
10. Use fraud prevention technology.
According to Association for Financial Professionals (AFP) research sponsored by Truist, 40% of businesses have seen an increase in fraud attempts.1 Digital fraud prevention programs and software can protect your company, especially when combined with cash flow forecasting that helps identify fraud before it happens.