5 Cash management solution trends to look out for in 2022

Without accurate cash management, a business may become non-solvent due to a lack of accessible cash for regular or unplanned needs. Many SMEs struggle with cash management and healthy cash flow since they rely on sales and timely payments, which are often unpredictable.

Businesses that have poor cash management can fall behind in debt and monthly operational expenses, making it extremely hard to recoup stability.

The majority of cash management systems start with cash receipts and help automate data consolidation of financial data to reconciliation.

Some key features of the cash management applications

• Cash pooling in multiple currencies.
• Opening, registering, changing, and canceling bank accounts.
• Tracking cash balances across different bank accounts, intercompany accounts, currencies, countries, entities, and more.
• Segmenting cash transactions automatically (e.g., A/R, A/P, taxes, payroll).
• One-to-one, one-to-many, and one-to-all cash transaction matching based on the predefined rules.
• Assigning cash transaction limits and target balance thresholds across bank accounts.
• Monitoring current ratio and quick liquidity ratio to plan to operate, invest, financing cash activities.
• Detecting frauds.
• Drilling down on cash transactions in real-time (by period, currency, branch, region, bank/intercompany account, etc).

Cash management trends emerging for 2022 and beyond:

1. Digitalization of the treasury: Because there are so many routine transactions going on all the time, digital cash management applications can help speed up and streamline the process.

   Automated cash management software helps businesses eliminate the risk of human errors. Moreover, better-digitized processes allow businesses to improve funding, automate their day-to-day treasury and finance operations, and improve decision-making.

2. Payment solution for cash flow efficiency: Payment efficiency is also a requirement for several other cash management tasks, such as improved cash visibility.

   Working with ERPs, existing TMS, and numerous banks, which is the most difficult component of setting up a payment solution, is also covered and can be used to implement new solutions along the process. Having a single tool allows more control over how payments are processed, approved, and released to the banks.

3. Outsourcing bank connectivity: Due to the various communication systems and file formats, connecting to banks is difficult. When banks make corrections, the existing link must be updated to reflect those changes.

   On the other hand, a connection to an ERP system (such as SAP or another) or a TMS should be available to rapidly get all accounts payable data. This requires the use of a different communication system and data format.

   A data mapping between the two different data formats is required to ensure that communication between the bank and the organization works properly.

4. Automated Reconciliation: Reconciliation is an accounting process in which two sets of records are compared to ensure that the results are correct and consistent. Reconciliation also ensures that the accounting system accounts are consistent, accurate, and complete.

   Automation of the reconciliation process is expected to be the goal of 2022, allowing businesses to streamline the process for faster month-end closing.

5. Improved Security: Artificial intelligence and machine learning are being used by businesses to detect suspicious fraudulent behavior and detect manual errors.

   Because all businesses are vulnerable to financial crime, fraud prevention should be a no-brainer. It’s almost as if it’s insurance for lowering the risk of an actual incident.

For businesses of all sizes, cash management software is becoming more accessible. In nearly any business, a payment factory, liquidity management, or reconciliation can be simply deployed at a reasonable cost. The trend has been moving from one-size-fits-all solutions to a hyper-modular approach. A company can benefit significantly by making the shift towards cash management software.

Essential factors for a cash management system:

• Powerful data visualization capabilities: To enhance overall cash transparency.
• End-to-end cash management automation: To eliminate time-consuming manual procedures from cash placement and reconciliation to cash forecasting and reporting across all cash management processes.
• AI-driven forecasting cash flow: To provide accurate insights on future cash flow for improved liquidity planning.