Ask finance leaders what keeps them awake at night, and you’ll hear a common answer: cash flow. After all, liquidity is the lifeblood of a thriving business. Having cash in the right place at the right time is vital to keep plans on track, steer through challenges, and keep a lid on risk.
Right now, cash is more important than ever. In a period of ever-rising costs and volatility, companies that efficiently manage liquidity are better prepared to weather financial storms that have become the new normal.
But if treasury is your business, you know managing cash flow is no small job. You’re charged with wrangling a complex web of information to understand your cash position, unlock working capital on the fly, plan future cash flows, and optimize the costs of banking. Multiply that challenge by any number of banks, accounts, and revenue centers, and the task is nearly overwhelming.
When Old Tools Fall Short
While managing cash with a firm hand is the goal of any company, too often their systems are not up to the job. Treasury leaders are forced to pull information from spreadsheets, disconnected platforms, and multiple banks in order to understand the cash position. As soon as a snapshot is compiled, the elements shift and the picture is inaccurate or incomplete. Even when the system is working, it’s too easy to get caught in a cycle of “compile, review, repeat,” forcing you to look backward instead of managing for the future.
That has consequences. Without a complete and connected view of liquidity, it isn’t possible to execute decisions smoothly up and down the value chain. That can lead to missed warning signs, delayed moves, and stifled growth.
Bringing It All Together
One approach in particular is improving this cashflow conundrum: cloud ERP. The right cloud ERP solution replaces reactive processes with a dynamic source of cash truth, turning information about working capital from across the organization into actionable insights. Suddenly, a real-time view of cash flow is available at your fingertips. You can be ready to make proactive decisions and seize financial opportunities you couldn’t act on in time — or that you simply couldn’t see — before.
Here’s the power of cloud ERP in practice.
1. See a single source of truth
The right cloud ERP solution closes the gaps created by fragmented account balances and manual payment processes. With a holistic view of your liquidity situation minute by minute — drawn from every part of your business — you can analyze, predict, process, and execute decisions smoothly. Instead of focusing on reconciling cash information, you are free to focus on actions that can improve your position. You are no longer chasing information, you’re actively managing it.
2. Activate your big picture
The right cloud ERP solution gets all the pieces working in tandem. Now cash management is embedded into the processes that affect working capital, like invoice-to-pay and invoice-to-cash processes. That means you see the impact on cash as these processes happen, not days or weeks later. And by actively managing cash in sync with receivables and payables, you can more easily take advantage of early payment discounts.
With the big picture at your fingertips, you can put new financial strategies in motion. Maybe that is tapping into third-party funding, or unlocking cash trapped in your receivables to improve your balance sheet. Whether you see an opportunity in your supply chain, inventory, accounts payable, or elsewhere, you can be ready to optimize your position based on the most up-to-date information.
3. Simplify your banking relationships
The right cloud ERP solution streamlines the many banks and accounts that support your business in one centralized view. You have access to real-time balance information and can manage all aspects of the relationship in one place, from opening and closing accounts to monitoring fees to signatory management.
As a result, manual processes associated with payments, order-to-cash applications, and order entry documents are fully automated, taking errors out of the equation. And with an integrated digital channel between your ERP system and all your banks, embedding EBICS and SWIFT connectivity is much simpler.
Cloud ERP at Work
Companies of all profiles are mapping their financial future on cloud ERP, including alterDomus, a leading professional-services company with offices in 21 countries. Moving to SAP S/4HANA Cloud allowed the company to move from seven fragmented accounting solutions to a single global platform. By taking its financial function to the cloud, the company was able to make improvements to its working capital strategy that manual processes could not, like automating foreign currency hedging to avoid shocks to its liquidity as well as improving everything from staff utilization and customer profitability to overall performance.
Japan’s Sony Group launched a global treasury transformation in 2018 based on SAP S/4HANA and trading platform integration. With the adoption of SAP solutions, Sony was able to minimize external financing needs and improve its visibility into cash management processes, regardless of location, which helped enormously during the pandemic when staff could access the platform from home.
Take the Next Step
Accurately capturing, analyzing, predicting, and processing cash flows across your business is mission critical. And the only way to get there is the cloud. What’s the next step? Explore all that SAP S/4HANA Cloud has to offer for finance leaders, then, download the recent report by IDC MarketScape to learn how industry leaders are using cloud-enabled enterprise treasury and risk management applications to manage liquidity with a higher level of confidence.
Because your cash complexity can be conquered.
Ido Shamgar is senior director of Product Marketing at SAP.