The Elevated Role of Cash Visibility and Automation in the CFO’s Office

The PaymentsJournal Podcast

The role of the Chief Financial Officer has evolved significantly in recent years, with finance offices increasingly tasked with driving business growth. As technology requirements and banking relationships grow more complex, CFOs often find it challenging to maintain the cash visibility necessary to optimize working capital and make informed strategic decisions.

In a recent PaymentsJournal podcast, Leo Gil, VP of Product at Bottomline, and Albert Bodine, Director of Commercial and Enterprise Payments at Javelin Strategy & Research, discussed the expanding role of the CFO and the ways finance offices can use automation to drive change in organizations.

Profound Importance

Visibility into an organization’s consolidated cash position is important, especially in the face of macroeconomic headwinds like interest rate fluctuations, market conditions, and supply chain disruptions. The CFO’s office holds primary responsibility for cash management and visibility, and as the importance of these aspects has elevated, the strategic role of the finance office has been amplified.

“CFOs these days are in a unique position,” Bodine said. “They know the financial elements of the business better than anyone, but they have also become key strategic contributors in an organization.”

The finance office works to maximize returns by reducing interest expenses and borrowing costs. It also allocates funds to investment accounts that drive better growth and profitability. Over the past few years, finance offices have had to simplify their operations to get a better return on investment, especially from technology.

Companies have had mixed results in those endeavors, and the size of the organization isn’t always the determining factor. Some small companies have full cash visibility and make appropriate, strategic investments. Some larger companies lag because they have too many disparate systems and excess complexity.

Unfortunately, many companies still rely on manual processes. They might log into multiple banking portals, extract the data, and combine it all into a spreadsheet.

“Technology can mitigate manual processing, but issues arise when companies take a big-bang approach,” Gil said. “They allocate substantial capital and resources to implement sweeping changes in an organization, hoping for an immediate result. They’re not willing to go through a long-term revamp or implementation to see results.”

Complex Banking Relationships

Some organizations have sought to solve their financial issues by increasing the number of banks they partner with. Other companies diversified their banking relationships in response to recent banking failures.

A company that previously managed three banks may now have expanded to 10 or more banking relationships, adding significant complexity. This expansion can make it challenging for the finance office to get a consolidated view of its cash position.

As the number of banking relationships increases, the importance of automation technology becomes even more pronounced. Businesses that rely on manual processes to manage multiple bank relationships will inevitably face the burden of constant financial aggregation in their daily operations.

“Aggregating bank statements might take two hours a day, then they must generate cash positions and cash forecasts, which takes three hours,” Gil said. “Then they need to generate liquidity forecasts and reconciliations, which takes another two hours. Before you know it, the day is over.”

Manual processes are inherently inefficient, and when data streams originate from multiple sources, finance offices struggle to manage daily operations effectively. If the finance team’s entire focus is consumed by operational tasks, they will never evolve into the strategic leaders that companies need.

Automated Consolidation

Organizations should have a fully automated, consolidated view of all their cash positions. Once they have accurate cash visibility, the next step is cash forecasting. Businesses don’t just need to know their position today, they must know where the company will be at the end of the week, month, and quarter.

Finance offices operate in cycles. In each period, whether it’s monthly or quarterly, they manage cash and payments. They perform reconciliations and comply with regulations. They make sure operations and payments are secure. Then they close the period out.

“There’s always a rush at the end of the month or the end of the quarter, where everyone is trying to find information across different systems and in ERPs, and combine the data,” Gil said. “There’s always something missing, and it’s a constant struggle.”

That complexity can be reduced by automation, and that allows finance teams to become more strategic. They can weigh decisions about potential acquisitions, or how to allocate cash for investments. They can make decisions about borrowing, and about moving funds between banks.

If it’s a global company, the CFO’s office can give guidance on currency conversions or foreign exchange trading. The goal is to minimize expenses and to react quickly to business needs.

Preparing for Instant Payments

The acceleration of instant payments adoption will soon impact businesses substantially. Ultimately, every money movement will be affected.

“If you transfer money into an investment account, if you borrow from a line of credit, or if you move money between accounts across different banks, those transactions become payments,” Gil said. “For some businesses, the ability to react quickly and move funds without waiting three to five days for payment settlement can be critical.”

In industries that are tied to market conditions, such as the oil and gas industry, every minute counts. Instant payments give companies the ability to react to market conditions and allocate funds quickly, which could save organizations millions.

Simplicity and Usability

Even though there are an increasing number of technology solutions, finance offices should concentrate on simplicity and usability. Instead of focusing on large systems with many complex features and functions, the CFO’s office should be agile and drive benefits to the business in an incremental way.

“There’s an inversely proportional relationship between value and effort,” Gil said. “Especially with technology, you can get 80% of the value with 20% of the effort. Of course, it can work vice versa. CFOs must be aware of those points in their organization and adapt accordingly. They must constantly work to drive return on investment, because that’s how CFOs help their organizations thrive.”

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