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Digitally optimised cash management
Against the backdrop of rising interest rates and inflation, a treasury that fully uses technology can realise the benefits of real-time access to data, digitisation, and automation.
In previous instalments of this series of articles, we explored how treasurers can benefit by offering their clients a wider range of digital payment options (read here), while companies involved in ecommerce and other platform businesses can use real-time domestic and international payments (read here). But this is only part of the story, as treasurers need to efficiently manage their cash balances, given the positive impact that optimised funds have across the company.
In order to optimise its cash management, a treasury must fulfil a wide range of tasks. It needs to quickly identify receivables against the relevant customer and contract, keep track of funds held across multiple bank accounts, and use all of this information to forecast future cash flow that helps to inform decisions that relate to meeting payment obligations, investment, as well as the repatriation of dividends.
Completing these tasks has traditionally been challenging due to insufficient information, along with a reliance on manual processes that are both time consuming and labour intensive. Nowadays, there are a range of digital banking solutions that simplify receivables management and optimise cash balances with simpler processes.
Introduction to HSBC Receivables Management Solution
We recently spoke with International Data Corporation (IDC) and our technology partner Kofax about the journey to co-create the HSBC Receivables Management Solution. This intelligent automation tool helps to simplify the invoice reconciliation process for corporates across Asia Pacific.
Solutions like this bring the following benefits:
- enhance cash visibility and forecasting
- consolidate excess cash
- and automate investment execution
Better visibility for enhanced forecasting
A large international company will likely have dozens of bank accounts, spread across multiple countries, currencies, and held with different financial institutions. The result is a fragmented cash position.
Getting a bird's eye view of the company's overall balance is the first step towards optimised cash management. HSBC's Liquidity Management Dashboard (LMD) for example, enables a treasury to get a real-time view of its entire cash balance, across accounts held at multiple banks, while data analytics tools present liquidity KPIs.
Once a company has visibility of its overall balances, the next step is to create accurate cash flow forecasts that can handle risks and be used in business decisions.
The most commonly used tools are either Excel spreadsheets, which involve time-consuming manual processes or Treasury Management systems that may be complex to implement. As an alternative, treasurers can consider using a bank-provided Cash Flow Forecasting (CFF) solution.
As banks already have access to their client's transaction and balance data, our CFF solution is scalable and easy-to-integrate, helping treasurers to digitise their forecasting process and enhance the quality of their forecasts
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Consolidated cash and automated investment
Real-time visibility of the current cash position and an accurate forecast of future cash flows, helps a treasurer make better decisions to efficiently allocate liquidity across the organisation. For example, surplus cash in one part of the business can be used to fund shortfalls in another, reducing the reliance on external funding in an environment where interest rates and inflation are on the rise. Some treasurers go one step further and automate these arrangements through Cash Pooling structures.
Finally, treasurers can use technology to optimise how they execute and manage their investments, in line with their organisation's investment policy – helping to meet security, liquidity and yield requirements.
Towards full optimisation
The journey toward fully optimised cash management takes a number of steps, which can each provide a renewed benefits to treasurers. HSBC can work with its clients at every step of this journey to realise efficiencies so that customers are able to focus their attention on value-activities, while confidently relying on technological processes to safely manage their cash.
Against the backdrop of macro uncertainty and rising interest and inflation rates, organisations that embrace the benefits of technology to maximise and optimally use their cash, will be best position for the future. To find out how HSBC can help you achieve this, please speak to your relationship manager.