Focus on Receivables and Payables to Enhance Cash Position

By improving visibility on accounts, businesses can make working capital decisions using accurate and timely information on their global cash position. This ensures the centre of the business is less reliant on filtered information sent from their overseas operations. Further, in light of recent global natural disasters, corporates have a heightened need to increase the absolute awareness of funds residing in all global accounts. By enhancing visibility over their cash, efficiency is created within the working capital cycle, which can release more funds. Improved working capital cycles increase cash velocity for faster recycling of funds within normal operations. Funds can then be used to reduce dependency on external credit providers, reduce costs and pump more lifeblood into corporations. There are real efficiencies that can be realised for corporations that increase their cash visibility. This can save corporations in excess of AU$500,000 per annum by reducing processing cost, increasing processing accuracy and reducing write-downs.

The Current Situation

In most corporations today, all accounts must be reviewed to get end-to-end visibility over cash flows. This will often include accounts in different countries and time zones, and held with different banking institutions. To paint a precise picture on cash position, the settlements of these accounts need to be understood and reconciled. Immediate payables – items such as payroll, supplier settlements and high value payments – need to be resolved. This data is processed through different parts of a corporation and is then filtered to the treasurer, who must make an educated decision on optimising the cash asset. The treasurer aims to minimise idle cash, meet commercial and other obligations and invest any residual short-term cash. Decision clarity is centred on knowing the aggregated cash availability, the location of this cash in the corporate accounts and how any surplus can support internal operations by leveraging liquidity management solutions.

Additionally, forecasting is an integral function of treasury. As it is based on a mix of activities, the corporation relies on data to understand the trends and exceptions. Trends based on time of day, daily, weekly, monthly, quarterly or annually need to be modelled to provide cash predictability to enable a corporation to move from cautious to confident.

Forecasting can save costs – so long as it is based on accurate data. Poor forecasting causes increased costs for corporations, due to missed action on opportunities or risks. Poor forecasting can be a result of inaccurate data or delays in receiving it. It is only when the visibility over the end-to-end cash flow is increased that foregone opportunities are understood.

What Can Be Done?

To achieve end-to-end visibility of cash flows, all roles that support the financial value chain need to be reviewed.

The underlying principle is the speed and accuracy of information in accounts payable (A/P) and accounts receivable (A/R) functions. Speed enables the business to be informed sooner, which can mean expediting its ability to act on opportunities or risks. Increased accuracy may mean back office functions are supported with valid information, creating smoother processes in reconciliations and collections. Ultimately, greater clarity enhances treasury’s forecasting view and the department’s ability to make vital decisions.

Immediate, intraday, accurate financial information enables unobstructed cash flow decisions. However, the benefits are only fully realised when this covers payables and receivables.

Staying on Top of Receivables

A tried and tested cash flow strategy is to ensure money is collected quickly, but only paid out when it is essential. However, many corporations cannot simply lengthen terms on which they pay their suppliers, as this could adversely affect trade and supplier relationships. If the focus is only on cash that the business has already received, visibility is lost on funds that are due. Increasing control of receivables before they become too difficult to collect, by mapping out aggregated receivables in advance, will identify the high-risk items.

Furthemore, a lack of control over receivables often results in write-downs, which are a strain on the business and can cause resources and funds to be tied up. Increasing cost pressure also demands an active control of cash. Ensuring your incoming funds are obstacle free and reducing the days’ sales outstanding (DSO) will reduce, and may even eliminate, bad debts and write-downs.

As an example, for many corporations the cost of managing unmatched items in the reconciliation process is a key requisite of receivables processing efficiency. Corporates should work with banking partners that can use customer-centric account information and reference it to include remittance data. This will enable automatic reconciliation and significantly improve visibility over this part of the cash cycle. Cash receipt advice is critical in the financial supply chain and by clearly identifying remitters with known, agreed referencing, receipt confirmation can be enabled in a timely and integrated manner. Further, corporates should look to integrate this information into their accounting systems, enabling access to real-time information and transformed bank statements. Some advantages of doing this include:

  • Reduction in staff time spent on investigating unidentified payments – based on the volume of cheques.
  • Reduction of unidentified cheques received leading to a reduction of employee hours per month investigating unidentified payments.
  • Automation of cheque reconciliation providing quicker information from the bank into the accounting system.
  • Daily receipt of reporting that enables monitoring of systematic issues and trends.

While it is apparent to see the soft benefits of this, the hard benefits of reducing processing costs and simplified processes can provide corporations in the region of AU$200,00-500,000 per annum in cost savings, in our experience.

Better Payables Management

A company’s true cash position is unclear when old, redundant or time-consuming manual tasks underpin its payables process. This also costs corporations substantial amounts of money in areas such as remittance production and accounts reconciliation. Unpredictable cash flow is often caused by timing uncertainty in cheque presentment. Lack of clarity in the status of payments, once made, is an inhibitor to effective cash flow-related decision-making.

Paperless payables solutions can help streamline your invoice payment process. These solutions also add value by providing information associated with individual payments. For example, internal staff and recipients of your payments can have access to an online platform that enables visibility of all data associated with a transaction or information on payment date. These platforms offer enriched payment information and can enable real-time reporting of transaction status. This visibility enables a reduction in the number of enquiries to back office teams supporting payables.

Furthermore, the option to build customised reports will ensure that information is translated into a format that is relevant for individual corporations.

Working capital solutions, such as trade finance, coupled with these online platforms, enable timely decisions relating to extending and standardising payment terms, without adversely impacting suppliers and reduce a corporation’s days’ payable outstanding (DPO).

These online platforms can also enhance payables by supporting trade financing by facilitating:

  • Visibility of approved invoices due for payment, actual timing of payments and into which account they are processed.
  • Visibility of payment related information such as remittances online – this will reduce time delays in understanding the details behind payments received.
  • Information that can be downloaded from online solutions for easy account reconciliation purposes.

Increase Data Integration

By reducing the information time lag for a corporation, cash flow decision-making is enabled sooner.

To make an accurate assessment of cash, financial data is required as it happens. Bank-to-corporate connectivity is evolving and better intraday information is being enabled by an increasing number of banks.

Data integration will increase the delivery of timely bank data into corporate systems, resulting in as close to real-time information as possible. Data integration, using the correct platform and allowing access to historical bank information, can enable visibility of clear trend information and also plugs cash asset leakages.


A corporation must ensure that the entire financial value chain is included in enhancing cash flow visibility. The speed and accuracy of payment information across both A/P and A/R functions in a corporation is critical to ensuring that the treasury function can undertake effective decision making. Data integration must be a part of any end-to-end cash flow solution.


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