Protecting cash flow during economic uncertainty

In our latest contribution Andy Lilley, Chief Product Officer at Rimilia, an AI-powered fintech, discusses how intelligent automation can empower financial leaders to take action.

News around established companies struggling with issues, ranging from cutting costs, furloughing staff, and pauses in trading, are hitting the headlines almost every day. It is a clear indication that any organisation, regardless of size, might struggle with maintaining a sustainable cash flow in the current climate. In fact, as the UK economy experienced the biggest drop in over 40 years, it is inevitable that the pandemic will have serious financial implications for virtually every industry.

Deloitte’s recently published report on ‘Managing cash flow during a period of crisis’ stresses that even businesses that seem to be in good financial shape, might be at risk of going bust. In spite of possible scenarios how the situation might unfold and how long it may take to return to business-as-usual, organisations will continue to struggle if they can’t access the lifeline – the cash that is owed to them.

Rethinking cash flow

Black Swan events and sudden slumps in demand make leaders realise how important efficient cash flow management is, and can expose shortcomings of currently used solutions.

Although scrapping current financial processes might seem like a challenging task to achieve at present, the time for businesses to rethink their approach to managing cash is now. Today, remaining optimistic and simply ‘doing nothing’ is bound to cause severe damages to the business. Following insights outlined in Deloitte’s report, it is key to explain why applying automation as well as prioritising account receivables (AR) is necessary to alleviate threats and mitigate economic volatility.

Prioritising Account Receivables

When hit by a sudden disruption, companies instinctively turn to the usualapproach to optimising working capital such as cost-cutting, decreasing the number of suppliers or even delaying due payments. These steps only bring along further issues such as lay-offs and poorer relationships with partners. Whilst companies take seemingly ‘necessary’ measures, AR is often left untouched and remain an untapped source of cash.

As the report suggests, “smart companies are shifting their focus from the income statement to the balance sheet” – this is why companies should take a closer look at receivables management. By rethinking and improving credit and collections strategy, companies could free up capital that exists in businesses’ own balance sheets. In other words, companies already have the capital but are unable to spend it, due to inefficient invoice processing that for many are dependent on resources working remotely.

Now more than ever, AR teams should look to not prioritise repetitive tasks, such as manual data entry, hunting down remittances and resolving exceptions. In today’s difficult economic circumstances, senior management should focus on redeploying staff to more value-adding and strategic activities, such as data analysis, risk and customer management.

AI-powered automation

A large number of organisations still lack the appropriate measures to meet the challenges of customer management. By sticking to repetitive, traditional financial processing they put companies at risk, as the CFOs are unable to access customer information quickly. Applying intelligent automation to the account receivables significantly reduces dependency on people and manual work as well as provides real-time transparency on the cash flowing through the business.

AR Automation leveraging Artificial Intelligence (AI) gives financial leaders the ability to make informed decisions faster to better manage customer relationships and mitigate any potential threats. The AI layer on top of the standard, often time-consuming, operations ensures that difficult circumstances – such as customers struggling to pay as well as cash collection issues – are not detrimental to the overall business.

Furthermore, the ‘analogue’ approach to matching payments to invoices in spreadsheets requires staff to be physically present in the office. With the traditional model of workplace redefined by COVID-19, it is becoming clear that only automation can give financial teams much needed flexibility. AI-powered processes allow all members to access and gain visibility into the current state of cash flow from anywhere in the world.

As Deloitte highlights, ensuring that companies have the insight into potential financial risks their key trading partners might bring, is vital in times like this. Intelligent automation gives the financial teams insights into changing customer behaviour and enables them to focus on key strategic decisions. During the current crisis, financial departments are tasked with an overwhelming job of estimating and predicting the future: Are my customers at financial risk themselves? Will they be able to pay for the services we have provided? Do we need to extend the credit line? In such volatile times CFOs need real-time answers to these questions more than ever.

Prepared for tomorrow

Being able to manage suppliers and understand what happened with customers’ payments helps unlock cash reserves in critical times, and stable cash flow enables a business to manage through a downturn without the need for urgent reactive change. It is important to keep in mind that efficient financial management and automation implemented now, can mitigate threats to the business and give companies the competitive edge even after the crisis. Future-facing leaders will take decisive steps now, as the cost of standing still increases with each day.

Andy Lilley

CPO at Rimilia. Over 20 years’ experience in the solutions industry and a proven track record in the Corporate Payments and Financial Services sector, earned as a result of a strong commitment to a ‘customer first’ philosophy.

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