An hour ago is an eon in the networked economy. Just ask corporate treasurers and cash managers about their recent roller coaster ride, courtesy of wildly fluctuating exchange rates between the dollar and euro.
While there’s no sure-fire way to avoid such massive swings, financial stewards can mitigate risk with the right information and action plans to use it for the company’s benefit.
Thack Brown, general manager and global head of Line-of-Business Finance at SAP, offers solutions to three of the biggest cash flow problems organizations face today.
1. Have real-time cash flow visibility
According to Brown, companies struggle if they don’t have a real-time view of global cash balances across multiple business divisions, regions and time zones.
“Managers should know where their cash balances are in real-time and need the ability to use system information so they can play out working scenarios and update data consistently for visibility into the expected cash flow position in the near, medium and long-term,” he says.
Public companies are especially vulnerable when it comes to events like the recent volatility in global currencies. Real-time cash flow data can be a bulwark against crises in the wake of such massive, unexpected events.
Nevertheless, Brown notes that many financial departments still rely on monthly or quarterly reports that only offer a rear-view mirror into what’s already happened. He describes an alternate approach using SAP Cash Management powered by SAP HANA, the newest component of SAP Simple Finance.
“We’ve combined our experience solving some of the world’s most complex financial challenges with the real-time data processing capabilities of SAP HANA to deliver the world leading financial platform. It allows companies to operate with the solidity and predictability the market demands,” he says.
The initial market response has been positive from companies including BSH Hausgeräte GmbH, a leading home appliance manufacturer of brand names including Bosch, Siemens, Gaggenau and Thermidor.
Patrick Spendler, director of treasury at BSH Hausgeräte GmbH, says “This application has the potential to improve planning accuracy and to optimize our processes in the treasury department. The results we have seen are very compelling, and we’re looking forward to our continued collaboration with SAP.”
SAP Cash Management powered by SAP HANA turns corporate finance into a strategic driver of business results allowing them to proactively take action to mitigate risk and take advantage of the company’s cash flow position.
2. Ensure accurate reporting to meet financial objectives
But the challenge is not just about making sure there’s sufficient cash to keep operations going. Brown says companies need real-time information to meet and keep promises to the financial community including stockholders and other stakeholders. “The ability to predict where I’ll be at the end of a quarter for external reporting purposes is very important,” says Brown.
3 Quickly make information actionable
The third challenge cash managers face is understanding the importance of the data at-hand, and having the ability to quickly take action and resolve problems. While this might sound fundamental to financial stewardship, many companies still rely on manual, fragmented systems that provide dated information.
“Consider the latest substantial currency fluctuations,” says Brown. “Knowing where your exposures lie so you can immediately protect your liquidity position is huge. With real-time, global data across systems and operations, managers can head off problems, transferring bank balances or adjusting hedging strategies to reduce an exposure in one geography, bank or subsidiary.”
SAP Cash Management powered by SAP HANA provides financial departments with real-time visibility into an organization’s cash position. The SAP Fiori launch-pad provides easy, immediate access to the information that matters most.
The business benefits of using advanced technology to reduce risk exposure aren’t limited to staving off financial crises. With real-time data, business models change. For example, companies can make sure they have sufficient liquidity in the locations where they need funds, avoiding overdraft and other bank fees. But things get really interesting when it comes to accounts payable and accounts receivable. Strategically applied information can turn the role of the CFO into a proactive business partner with bottom-line impact.
“You can look at what your liquidity position is at any given time, predict where you are in receivables and offer customers incentives to accelerate payments and overcome cash flow problems,” says Brown, “Or, if you’re in a good cash flow position, you can pre-pay on invoices to take advantage of discounts.”
The hyper-connected business world is only getting more complex. However, with the right information and technology, financial decision-makers might just smooth out some of the peaks and valleys that are an inevitable part of the cost of doing business.
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