Data and profitability drive urgency behind automated cash management adoption

It’s no secret that continued economic uncertainty and advances in technology continue to put the spotlight on liquidity and cash flow management solutions. According to the recent 2023 Business Payments Barometer, in the US, cash flow management software usage jumped from 53 to 64% of respondents compared to last year's Barometer results. Treasury management systems rose from 33 to 44% usage. In Great Britain, cash flow automation is now in place at 59% of all companies, up from 46% last year. Automated treasury management went from 27 to 37%, with a similar AI bounce from 22 to 34%. 

At one level, the need for automation is clear: It’s more efficient and provides cash visibility at a time when it’s desperately needed. But there is a much deeper level to this issue, and there you will find the need for data to drive impactful decision-making, using technology to mitigate payment fraud, and even the relevant use of manual cash management processes. To draw these issues out, we recently sat down with Bottomline’s commercial director of cash management and payments, John Rodgers, and Bottomline’s strategic customer success director, Richard Ransom, for a cash management Q&A. 

Bottomline: Richard Ransom, let’s start with you. You have the advantage of regularly speaking with companies that use cash management solutions and are at various stages of their automation journey. What are some of the fundamental issues they’re dealing with? 

Ransom: I think some interesting things that we've observed talking to customers around this space revolve around the advantages you see after cash management solutions provide a view into where money is at any point in time. When we get beyond that, the goal becomes accurate cash forecasting. So, once you have a centralized, automated way of bringing all your cash balances together by integrating information from the ERPs and potentially disparate systems, a business can see the payments they will make and the payments they’re likely to receive. When you extend that knowledge to a week or even a few months, that goal of visibility moves very quickly to one of forecasting.

Q: John Rodgers, cash management seems quite the urgent issue these days. Why is that, in your opinion? 

Rodgers: Change. Alongside business demands and economic expectations, the landscape is constantly changing. We consistently hear from our customers that there are four fundamental principles they need to build on. Those are centralized control, payment visibility, bank connectivity and processing. So, with a payment hub, businesses can gain easy and cost-effective access to any payment type or channel. And it's all in the cloud. Because of that, a payment hub can connect via APIs from all banks and ERPs with pre-built connectors, automating payment formatting and processing of domestic and international payments. In essence, cash management is urgent because it’s a better way for corporates to centralize, automate and securely manage their domestic and global payments, and bank connectivity needs.

Q: Richard, we’ve seen data recently that shows corporates are looking for a boost in profitability and their ability to compete for customers. Can cash management give them that boost, and how can it assist in making the decisions that will improve their competitive set? 

Ransom: Absolutely. First, corporates need to consider the pure productivity gains of having a single automated, timely view of all their bank accounts in one place. If doing business internationally, they’ll want to see where all the different currencies are and whether they can offset some of their FX costs. In terms of becoming more competitive, they’ll be able to look ahead and negotiate better borrowing and reduce the need for external funding. They can also start to make M&A and R&D decisions much more quickly. That alone can increase competitiveness because you can make better investment decisions.

Q: John does the move toward multi-bank relationships affect the urgency of adopting cash flow automation?

Rodgers: Multi-bank relationships increase the complexity of an organization’s cost structure as well as its growth potential. That complexity means you need to improve your financial operations, ensuring adequate liquidity and improved decision-making. As the structure becomes more complex, it's important to have a clear line of sight in terms of what your obligations and liabilities are.

Q: Let’s change the topic and move on to fraud. Richard, can a state-of-the-art cash management solution mitigate payment fraud? 

Ransom: It certainly can. The first way it accomplishes this is by automating sanctions screening. We don't want to see corporates sending money to a sanctioned individual or country or moving goods around using sanctioned shipping companies. It could end up with substantial fines. I’d also call attention to the different kinds of payments and social engineering fraud. For example, APP fraud has been a huge issue in the UK and can be mitigated by having the right data. There was a time not long ago when the ability to check a sort code and account number was very difficult to do. But in the UK, a relatively new feature called Confirmation of Payee automates name checking and verification, and this needs to be part of any cash management solution. Another thing that comes out in mitigating fraud is around the fact that you've created a centralized, automated source of truth. That means there's no way to hide transactions or to change the balances before they're put into a central piece of reporting.

Q: Let’s talk about manual processes. We recently saw some webinar stats that showed 100% of the audience used Excel for cash management at some level. The Barometer findings showed 32% of UK businesses still use spreadsheets in some fashion. We know it's not optimal, but when can it be used effectively? 

Ransom: Excel is a good place to calculate data and build charts, and it has a place as a useful, bespoke reporting tool, but it's not an integrated solution across a business, and it can't really be trusted as a single source of truth. We've heard of organizations that use spreadsheets for accounting purposes and, in many of those cases, one or a few people know how it was built. But if that person leaves the company, you've got problems. So, macros and scripts can provide some impressive but not customizable or supportable tools. So, yes, there’s a place for Excel. However, use it with caution. 

Q: As a follow on to that, do companies need to switch to automated cash management in one shot, or can it be a more gradual process? 

Ransom: You don't have to buy a full treasury management system. Some companies don’t need all the bells and whistles because they don’t have the complexity that requires them.  They just want to know where their money is and whether they can use it. I also think companies need to think through their connectivity needs. Some organizations don't have to learn how to connect to five different banks. They don't have to do this massive project because someone else, like Bottomline, has already done it. We understand the payments process as well as technology integration. 

Q: John, over to you. How should companies evaluate the needs that Richard described? 

Rodgers: Our current thinking is not to call for Big Bang projects, but to drive visible improvements that contribute to your business objectives. Because, as I’m sure some people reading this will attest, these projects can consume a lot of time and resources. Perhaps visibility, forecasting and payments are your initial steps. And then I think tying into that would be the ability to extend your capabilities to drive more value from your infrastructure by leveraging future-proof platforms. But the most important thing is to lay a strong foundation for payments and cash management, embrace the cloud and then manage the speed of change. There are a multitude of API integrations, systems and platforms to choose from so trusted partners important. Choose a partner who will remove complexity, offer better visibility, and help future-proof your business.