Tame Cash Flow Management with These Secret Weapons

Cash Flow Management

If you find cash flow management a challenge, you’re not alone.

A survey found that 2/3 of the financial and senior executives interviewed “agree that such activities as accounts payable, accounts receivable, capital expenditures, raw materials inventory, and finished goods inventory meaningfully affect working capital management.” Yet, while the respondents acknowledged the importance of cash flow management, only 46% said they had a plan for it.

That means more than 50% merely ride the cash flow roller coaster instead of trying to add strategy and control to support their businesses.

Part of an effective strategy to stabilize cash flow relies on tools. Valuable technologies such as accounts payable automation, approval workflows and ACH payments can add efficiency and (as a byproduct) predictability to the often unstable pattern of cash flow.

Inefficiency and it’s Effect on Cash Flow Management

Inefficient operations not only take more time, effort and expense, but also complicate cash flow management efforts.

Consider the typical bill pay process.

If your business relies on paper checks to pay bills, the process might look something like this:

  1. Receive paper invoices from vendors
  2. Dig out associated contracts and payment history to verify charges.
  3. Put invoices to stakeholders’ desks to review.
  4. Send reminders to those who haven’t reviewed the invoices.  
  5. Field questions from reviewers about invoices and payment histories.
  6. Send more reminders and field more questions.
  7. Gain final approval.
  8. Print or write out checks.
  9. Get checks signed.
  10. Print addresses on envelopes, address them, stamp them and stuff checks.
  11. Wait for mail to deliver checks.
  12. Pray that you got the check there in time to avoid late charges.
  13. Wait for the recipients to review and process checks.
  14. Wait for the bank to clear checks.
  15. Reconcile payments in accounting software.

The whole process might take weeks or months depending on each company and process. It also depletes a company’s ability to control the cash flow, since so many elements (mailing, cashing, etc.) are out of its control.

However, when you migrate to a more efficient process you reduce steps and introduce greater control into your cash management process.

Tools that Add Efficiency to Cash Flow Management

Accounts payable automation, which includes features such as approval workflows and ACH payments, can bring more efficiency to bill payment.

The tools allow you to digitize and automate the bill payment process. By jettisoning paper-based processes, you streamline the bill payment process to something like this:

  1. Bills enter The electronic bills are validated against corporate guidelines and automatically sent to the first person in the approval person.
  2. When that person approves the bill, it is automatically sent to the next reviewer. If that person takes beyond the designated time to review, an automated reminder is sent. Throughout the review process, reviewers can leave notes or questions about the invoice in the system. All contracts, invoices and payment history for the vendor is also in the system – only clicks away.
  3. The bill is approved for payment.
  4. The bill is paid by electronically by ACH, negating the need to print, sign, stuff and mail checks.
  5. The payment is noted from your account immediately, giving you an accurate, real-time picture of your cash flow. There’s no guessing as to when a check might clear.

Likewise, automation can also support cash flow efficiency for AR. Instead of manually compiling invoices and mailing them, a system like can automatically create invoices and send them electronically on set dates. It also sends out automated payment reminders and enables your customers to pay online in a variety of formats such as ACH and credit card. The easier it is to pay, the quicker you can get paid.

Even better, your customers can set up automatic payments. That means your customer will automatically pay on a set date – no fuss, no trouble - merely a deposit into your company’s account. If you have a majority of customers signed up for this feature, then you have a set schedule of when to expect payments.

Each of these features radically decreases the amount of time it takes to receive payments or allows scheduled auto-payments. The end result of this process is less time spent waiting for cash, and a greater ability to create an efficient, transparent and stable cash flow.

See how can create greater efficiencies for your cash flow.