Fragmented Business Payments Data a Friction Point in Cash Flow Forecasting

In today’s challenging macroclimate, every competitive insight counts more than it ever did.

That’s why activating an increasingly rich tapestry of internal accounts receivable (AR) data through analytics and reporting can help businesses optimize their cash flow forecasting, improve days sales outstanding (DSO), and foundationally transform their working capital strategies.

“We are on an evolutionary journey,” Andy Murphy, director of receivables product management at Bank of America, told PYMNTS. “A lot of companies are not currently realizing the trapped value of their data — but it’s the new oil.”

He emphasized that by leveraging the vast amounts of information businesses are increasingly able to glean from nearly every touchpoint, organizations can come away with insights and analytical recommendations to a degree never before possible.

So, what is it that’s holding companies back?

“One of the biggest blockers to tapping into [increasingly rich data resources] tends to be a lack of visibility,” Murphy explained. “Companies have access to so much data in their systems, but the problem is that it’s fragmented and it’s messy. And so quite often, it can become very difficult to transform that data into something more meaningful.”

See also: Companies Tap Their Own Data to Drive Efficiencies With AI

Not All Data Is Created Equal

The countless terabytes of data collected today are what allow organizations to visualize and automate relationships across different locations, departments and systems.

“Companies need to be able to produce, through data analytics, a single source of truth that can generate proactive and actionable insights,” Murphy said.

This “single source of truth” is what helps turn historically reactive operational AR functions into proactive growth drivers and a key contributor to overall business health, he said.

Automating back-office and financial business processes and activities is proving critical to providing leaders with real-time insights through data analysis, and data-ready organizations are more able than their competitors to gain an advantage when it comes to integrating and activating digital innovations.

As for what the immediate, easy wins of a “big information” strategy are?

Murphy explained that while the key benefits are all interrelated, the biggest takeaways include maximizing revenue while minimizing costs, as well as improving relationships with end customers.

That’s because visibility and control over money in and money out provide a much fuller organizational picture that can better inform decision-making while allowing for greater flexibility and responsiveness.

After all, businesses don’t know what they don’t know, which is why leveraging data-rich environments is so important for companies attempting to predict future revenue streams or develop a liquidity management model.

“There are additional nuances that [data lets businesses] tap into because historically, things like cash forecasting look at payment behavior in [terms of] two dimensions,” Murphy said.

Future-fit data analytical capabilities, by contrast, tend to take a multi-modal approach to transforming data, drawing upon “additional comparison points” around customer behavior to provide a more robust picture, he said.

Adoption Requires Education

While performance hinges on data accuracy, integration and adoption of modern solutions hinges on education and understanding the capabilities that exist in the marketplace.

Most companies operating today produce vast amounts of data, but many of them don’t have the resources or expertise necessary to glean critical AR and payment data and transform it into actionable insights.

“A lot of the room for improvement is around adoption,” Murphy said. “Being able to manipulate data gathered from various sources often depends on both the quantity and quality.”

Organizations also need the appropriate data governance models to effectively harness that data as well as to layer on the tech that’s available to drive better decision-making.

Establishing a modernized infrastructure that can grow in step with the demands of today’s ongoing digitization is only growing more critical as it continues to play a key role in driving business success.

Particularly because, as Murphy explained, “we are only just scratching the surface when you consider how much data is expanding.”

“Even between now and five years from now, there will be an exponential growth in the amount of data that is available, and that will bring with it an accompanying growth in the number of insights and recommendations — the real value — born of that data,” he said.

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