B2B Payments

Big Corporations Struggle With Cash Flow Visibility, Too

Technology and SaaS startups are earning significant attention for their innovative solutions that can offer businesses greater insight into their cash flow. Many of these startups focus on small- and medium-sized enterprises with the understanding that these small businesses often face the toughest hurdles when managing finances: SMEs do not always have the capital to invest in expensive solutions offered by major banks, and they are often more dependent on proper cash flow management to survive.

But new research that emerged from two separate studies last week may serve as reminder that even large corporations suffer from inadequate cash flow management.

Cashfac Technologies and Visa commissioned East & Partners to run separate surveys regarding cash flow management and visibility experienced within Asia Pacific conglomerates.

Clouded Cash Flow Visibility

According to Cashfac’s survey of hundreds of corporations in Singapore, Hong Kong, Malaysia and Australia, all with an average annual turnover of $1.43 billion, there are significant shortcomings regarding the level of cash flow visibility, sometimes in unexpected places.

Altogether, nearly two-thirds of the corporations surveyed did not have access to a real-time, consolidated view of their cash flow, meaning their transactions and balances. For those businesses that did have insight, Cashfac found that on average only about 54.8 percent of funds were visible.

Some of this lack of visibility, the study suggests, may be attributed to the multiple bank relationships these corporations have. “Corporates find that most solutions in the market are well designed for a specific purpose,” said East & Partners Asia Senior Analyst Darryl Ye. “However, integrating it into their own ecosystem of systems based on their unique needs becomes a nightmare for corporates when the patchwork of work-around solutions are inflexible to adapt to future changes.”

In other words, companies, especially those that work with multiple banks, find it difficult to integrate multiple cash flow solutions from multiple providers in a seamless way on a single platform.

What’s more, the research found, inadequate services from banks and the high cost to implement and upgrade these solutions were found to be the two largest hurdles for corporations in achieving real-time cash flow insight. This is despite findings that corporations generally felt that multibank solutions are designed to meet their needs.

“The results highlighted that solutions from banks were inadequate, and where available, corporates deemed them to be too expensive,” the research concluded.

Two Ends of the Spectrum: Malaysia and Australia

Of the four Asia Pacific nations surveyed by Cashfac, Malaysia emerged as having the worst cash flow visibility: 71.9 percent of businesses in the nation do not have a real-time, consolidated view of their cash flow. For those that do, corporations also have the lowest percentage of visible cash (just 44 percent).

For Malaysian firms, the research found, high technology upgrade costs pose the largest barrier to achieving greater cash flow visibility.

At the other end of the spectrum, the study revealed, sit Australian corporations, though they too have significant gains to make in improving cash flow visibility. Australian companies were found to be the most satisfied among all corporations with their ability to tack intraday cash positions, a curious finding considering Australia’s time zone difference compared with the rest of Asia.

But the Visa Cash Flow Visibility Index revealed that while Australia may hold greater cash flow clarity than Malaysia, there is significant need for improvement. “Australia is leading the way in many digital payment areas but it is clear Australian corporates could benefit from improved processes,” said Visa’s Australian head of Commercial Payment Solutions Ian Boyd.

Nearly three-quarters of Australian companies cannot forecast their cash flow 60 days ahead, the research said. Less than 35 percent do not even have visibility just 30 days ahead. Employees within Australian firms spend more than 116 hours every week to manually enter cash flow data and prepare analysis reports.

This, the research suggests, is due to a lack of adequate cash flow management solutions, from banks or elsewhere.

Cash Flow Management Solutions

The data clearly expresses a need in the South Pacific region for stronger cash flow management services, even for some of the strongest markets like Australia.

“The fact is there is an opportunity for Australian corporates to adopt business-to-business payment systems that are more digitized,” said Boyd.

But this lack of flexible, easy-to-use tools reaches beyond Australia, and, according to Cashfac managing director Alastair McGill, this does not need to be the case. “Corporates across Asia Pacific are often handcuffed by inflexible and bank-specific systems, which restricts transparency of operational cash,” McGill said. “There is absolutely no reason why these firms shouldn’t be able to see the majority of their cash in real-time and have the tools and processes in place to maximize the value of cash in their businesses.”

Major conglomerates are often perceived as having access to limitless resources to manage their operations, and startups developing these resources frequently target SMEs. But Cashfac and Visa’s research reveals that the large size of a corporation can actually complicate cash flow visibility even more. Multiple bank relationships mean multiple cash flow solutions, which do not always integrate with each other. According to East & Partners Asia CEO Lachlan Colquhoun, there is a positive correlation seen within more sophisticated markets, like Australia: these corporations, the research shows, have more bank relationships, meaning more data flowing in, a higher degree of overlap of that data, and a far more complicated business process muddling cash flow insight. Cash flow solution innovators, it seems, must therefore not forget the big guys.

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