Managing your treasury: unlock its potential with automation

Regardless of its size, cash flow is the lifeblood of a company. Mismanaged, it will suffocate the business to the point of asphyxiation. Conversely, effective cash flow management will be a true driver of performance and growth. So, what does good cash flow management entail? Xpollens offers a comprehensive overview of treasury and how to maximize its potential.

The analogy may be somewhat trivial, but it’s accurate: a company’s treasury is essentially the total of its financial resources at any given moment—in other words, the money it possesses, which fluctuates with its activity. Cash flow decreases with expenditures and disbursements and increases with inflows. The emptier the wallet, the less able the company is to operate and invest in its future. Monitoring cash flow and maintaining its balance is therefore essential for the company’s health.

Both essential and complementary, to differentiate accounting from treasury, we must start with a basic principle: accounting focuses on the transaction date, while treasury focuses on the date of receipt or disbursement.

In practice, for an invoice, the accounting date is its issue date, while payment terms can extend up to 60 days after the invoice is received. As a result, a company can run out of cash even if it is profitable from an accounting standpoint!

Another key difference: in accounting, expenses are spread out over the year, whereas cash flow is in real time, with many more movements and expenses that can immediately create a deficit.

So, you understand why cash flow management is crucial. It enables better decision-making, anticipates problems, and ensures swift responses to unexpected events, all with one goal: ensuring the company’s profitability.
Yet, too many companies still merely consult their bank statements without considering a review of their methods and tools for more agile cash flow management.

To manage cash flow effectively, before thinking about methods and tools, one must have a clear understanding of all the missions, their underlying tasks, and their stakes. And you’ll see, it’s all quite manageable!

Thorough, regular, and exhaustive tracking revolves naturally around two types of financial movements: inflows (incoming payments) and outflows (outgoing payments).

1. Listing incoming flows: Identify the deposits into your company’s bank accounts, organizing them by income category: sales, loans, customer payments, grants, refunds, etc.

2. Listing outgoing flows: Identify the planned disbursements, again organizing them by expenditure category: salaries, social charges, taxes, investments, suppliers, etc.

Using cash flow tracking data and the following four steps, forecasting your treasury will help you measure risks and plan your strategy in line with your liquidity.

1. Creating the forecast plan: Based on the dates when bank movements are expected, estimate your cash balance over specific periods (short, medium, and long term). These forecasts allow you to anticipate liquidity problems.

2. Updating it regularly: A company’s cash flow sees numerous daily movements, including unforeseen ones. Regular monitoring of money inflows and outflows is necessary to correct discrepancies between forecasts and actual figures.

3. Making necessary adjustments: If discrepancies are too significant, adjust your strategy by either reducing expenses or increasing income.

4. Imagining cash flow scenarios: What if you lose a client? What if another doesn’t pay? What if you secure three major orders simultaneously? What would be the impacts on your cash flow and organization? Scenario planning helps manage risks that can destabilize your treasury.

Accurate knowledge of your cash flow situation and the ability to anticipate its movements allow for better relationships with all business partners. Whether clients, suppliers, bankers, or investors, it becomes easier to grant or request payment terms and negotiate financing.

Beyond improving financial visibility, good treasury management leads to cost reductions associated with banking fees, late penalties, loan interest, and avoids costs related to unpaid invoices and factoring.

With a forecast plan, you can plan loans to secure identified periods of low cash flow. Conversely, you can identify periods of surplus cash flow and plan various types of investments. This means that effective cash flow management not only optimises costs but also generates income for the company.

Ensuring liquidity, managing risks, and generating revenue, the treasurer’s tasks have become significantly more strategic. To meet this challenge, treasurers increasingly turn to technological innovation, particularly automation.

Automation offers unparalleled leverage in transforming businesses by combining numerous advantages:

1. Error reduction: Minimises human errors to prevent inconsistencies with severe repercussions.

2. Time savings: Frees up time for more strategic activities such as analysis, risk management, and treasury forecasting.

3. Real-time visibility: Provides real-time visibility of the company’s liquidity for informed and reactive financial decisions.

4. Accurate cash flow forecasts: Facilitates better planning of operations aligned with the company’s context and strategy.

5. Cost reduction: Lowers operational costs by reducing manual tasks and accounting inconsistencies.

6. Improved risk management: Enhances risk management through automatic alerts and processes for better responsiveness and minimized risks.

7. Regulatory compliance: Supported by the partner or technical solution, relieving the burden of manual updates in response to constantly evolving financial regulations.

8. Customized processes: Adapts to the specific needs of the business.

9. Integration with other systems: Facilitates data sharing and brings more coherence and transparency by integrating with accounting, financial management, ERP, and CRM systems.

10. Advanced data security: Ensures the security of financial data through encryption, authentication, and monitoring of non-compliant activities.

These advantages encourage companies to consider the potential of treasury automation. But to implement it, is a complete overhaul necessary?

To modernize cash flow management, companies now have a range of management tools—ERP, invoicing platforms, collection platforms, accounting software—that can be effective but often remain siloed. Automation requires significant interoperability and intelligence between different data sources to create reliable and smooth workflows. This is why new players are disrupting the market with all-in-one platforms and Banking-as-a-Service (BaaS) platforms.

From invoicing to purchase management, accounting, and treasury, all-in-one platforms enable businesses to become their own bank in managing payments while offering a set of operational advantages:

• A 24/7 accessible dashboard: Provides a real-time 360° view of transactions for better productivity.
• Collaborative features: Enhance teamwork.
• Operational time savings: Achieved through automated and secure processes.
• Access to accurate data and clear reporting: Crucial for business management and informed decision-making.

These solutions primarily cater to freelancers and SMEs looking for a simple, one-stop-shop solution to replace their bank.

For these types of businesses that already have management tools and do not necessarily want to change everything by adopting a new platform, BaaS providers like Xpollens offer a new value proposition: integrating financial services previously reserved for banks into their digital ecosystems, regardless of their sector.

The major benefit of this new model is the integration of payment components – virtual IBANs, SEPA direct debit, instant payment – into existing tools, enabling all aspects of treasury performance:

• Reactivity: Through real-time tracking and categorization of incoming and outgoing flows and balance alerts.
• Securing incoming payments.
• Cost reduction: Achieved by automating reconciliation and reminder processes.
• Focus on analysis and strategy: Allowing Finance and Treasury teams to concentrate on higher-value tasks by eliminating low-value ones.