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Data Digest: The Scary Stats On Cash Flow Management

This week, our Data Digest is all about cash flow, and while we’re still a month away from Halloween, the stats are pretty scary: Businesses can’t accurately see into the future of their corporation’s money flows, small suppliers are still struggling with outstanding bills and SMEs continue to cite financial struggles as their top reason for failing to repay loans.

Data can offer a pretty ugly picture of corporate money management, but one analyst this week had an interesting thought: Data will also be the key to developing strategies for better treasury practices.

Flying Blind

Here’s a bit of a terrifying statistic: More than 90 percent of companies across the Europe, Middle East and Africa region don’t have a transparent view into their cash flow.

[bctt tweet=”90% of EMEA companies don’t have a transparent view into their cash flow.”]

That stat comes courtesy of Cashfac Technologies and East & Partners from their newest EMEA Operational Cash Index. Researchers spoke with 350 CFOs and corporate treasurers among the top 1,000 revenue-ranked EMEA companies — meaning it’s not just small businesses that are struggling with their cash flow visibility.

And while East & Partners didn’t provide a specific figure, analysts said that a significant portion of those surveyed are probably well-aware that they’re flying a bit blind when it comes to managing their money.

“Interestingly,” said East & Partners Principal Analyst Paul Dowling in a statement, “a number of interviewees were hesitant in rating the accuracy of their cash flow; this is doubtless a result of their known inability to have clear line of sight to the organization’s entire enterprise cash positions and being somewhat wary of confirming this.”

Sungard pushed out some of its own figures on how corporate money managers are struggling to get a hold on their cash flows. The firm’s latest Treasury Risk Market Survey found that 39 percent of treasury officials surveyed across regions and industries still use the dreaded spreadsheet to forecast cash flow. By far, the most common technology used among money managers to forecast cash flow for the short term was no technology at all, with 39 percent reporting the use of manual strategies to do so.

About one-quarter are operating in their companies with short-term cash flow accuracy of less than 70 percent, analysts added, which begged the question for Sungard, “Is it okay to only be 70 percent accurate with your cash forecasts?”

The short answer, of course, is no, and analysts found a positive correlation between treasurers’ use of treasury management solutions or cash flow forecasting technologies and a heightened accuracy of their forecasts. Unsurprisingly, the use of spreadsheets and ERPs (the second most common tool to forecast short-term cash flow) are correlated with a drop in cash flow forecast accuracy.

Problems Getting Paid

The U.K. seems to get all the attention these days when it comes to small businesses’ struggle with getting paid late by their suppliers. But it’s a global issue, and the latest figures this week make that abundantly clear.

One in three: That’s how many businesses across Brazil, Canada, Mexico and the U.S. are facing invoices in their Accounts Receivables pipeline that are more than 90 days past due, says Atradius’ latest Payment Practices Barometer. But it gets worse: 95 percent of companies surveyed said they have experienced a late invoice payment from buyers either at home or abroad in the last year — a statistic that Atradius calculated to equate to nearly 50 percent of the financial value within these businesses’ receivables.

[bctt tweet=”1 in 3: how many businesses across the Americas w/ invoices in AR 90 days past due.”]

Problems Paying

Let’s continue the trend of pessimistic stats with one final report: Moody’s has published new figures on SME loan repayment practices across Europe, and it’s not looking great for some. Particularly, small firms in Italy and Spain are struggling to pay their loans back on time as compared to their counterparts in the U.K. and the Netherlands.

Said in numbers, Moody’s found that, according to Intrum Justitia findings, 82 percent of Italian SMEs and 88 percent of Spanish SMEs reported financial difficulties as the reason for a late loan repayment.

[bctt tweet=”82% of Italian SMEs, 88% of Spanish SMEs reported financial difficulties for a late loan repayment.”]

On the other hand, 60 percent of Dutch SMEs cited financial difficulties as the cause for their late payments and even fewer — 39 percent — of U.K. SMEs said the same.

We know, the data that emerged last week is not likely to put a spring in your step. And while data can paint an ugly picture about corporate finance trends, according to Moody’s Senior Credit Officer and Vice President Monica Curti, data is also the key to improving those patterns.

“Improvements to the quality of, and lenders’ access to, data on SMEs’ creditworthiness will help lenders more accurately assess this, which will have a two-fold effect of increasing lenders’ willingness and ability to lend to SMEs, while simultaneously decreasing refining risk in SME ABS pools,” she said in a statement.

In other words, statistics are the key to improving borrowing behavior, and we’ll go out on a limb to say that they could also be the key to improving cash flow visibility, management and payment practices among corporate treasurers. 

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