Unlock the Power of Cash Management: The Key to Financial Freedom
Cash management, considered on the corporate level treasury management and individual level as personal financial planning, involves collecting and managing daily cash flows and is critical for determining an organization's or individual's overall financial condition.
Proper cash management enables individuals and companies to track better and control their finances, making it essential for financial freedom. It allows business owners to make more informed decisions, avoid unnecessary expenses, and prioritize payments to suppliers and employees.
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Corporate treasury management
Corporate treasury management aims to bring cash flow transparency to the companies, empowering them to make more data-driven decisions based on their financial conditions. Startups in this field offer digital CFOs tools that enable financial directors to automate tedious tasks, fostering collaboration and aggregation of multiple tools under one umbrella.
Startups in the space deliver their innovations directly to corporate clients or in cooperation with financial institutions that have a well-established network of businesses using their services.
Some innovations in this market include:
- Controllership: Focuses on accounting and expense management. Pennylane, Spendesk, Pleo, Moss, and Soldo are some startups providing this type of service.
- Cashflow management solutions that allow businesses to monitor and manage their cash flow. Startups such as Sibill, Upflow, Agicap, and Abacum offer these solutions.
- Financial planning and analysis: These solutions provide better financial planning, analytics, and reporting. Two startups in this field are Pigment and Growblocks.
- Equity management: Its goal is to aid with shareholder management and governance. Startups such as Treasury Spring, Capdesk, and Ledgy offer these solutions.
- Financing management: Startups like Uncapped, Billie, and Wayflyer help businesses access and manage financing for optimal financial operations.
Cash management elements
Efficient cash management is crucial to the success of any business. To ensure this, it’s fundamental to integrate it into the business’ standard procedures. To correctly manage cash, some critical areas to focus on are:
Realistic cash flow budget
Creating an accurate cash flow budget through periodic forecasting and reviewing cash flow statements is crucial to prevent cash shortages. This report provides valuable insight into the origin of cash inflows from accounts receivable and the use of funds to address account liabilities, investments, and operational expenses. Staying on top of the cash flow and safeguarding a company’s financial stability is fundamental to success.
Bank reconciliation
Establishing a timely reconciliation of all bank accounts provides information on how to avoid collection delays. Regular and detailed bank reconciliations are the best way to detect fraud.
Projected revenue tracking
Knowing a company’s revenue situation directly affects the cash flow - whether the budget needs tightening or there’s enough money for investments. Similarly, analyzing projected revenues is the basis for allocating funds to improve products or expand the business.
Timely collection of receivables
Delayed payments can be attributed to three common types of floats. The first is the mail float, resulting from the delay in receiving postal checks. The second is the processing float due to internal money processing delays. Lastly, the bank float is the most frequent cause of delay due to banking delays. Understanding these floats can help businesses efficiently manage and mitigate delayed payments.
Monitor cash withdrawals
A business can identify fraudulent cash disbursements and unnecessary expenses by examining cash flow. This analysis provides valuable insights for detecting suspicious activity and improving financial management.
Personal finance management
Personal finance management tools are available for retail clients (B2B2C) and individuals (B2B), helping them stay on top of their finances.
These include budgeting apps, investment tools, and personal financial advisors. The objective is to help people understand their financial behaviors, analyze cash inflows and outflows, and guide users toward better financial decisions.
In personal finance management, startups have used technology to deliver new products to clients, such as robo-advisors, micro-investing apps, and digital bank accounts.
Personal finance management solutions
There are several categories of personal finance management solutions available today. These include expense-tracking tools, budgeting apps, credit monitoring, and financial advisory services. Some personal finance management tools include:
- Personal finance planning and budgeting: They help individuals understand their financial situation and provide future projections. B2C and white-label B2B2C applications offer a complex overview of the individual's current and future financial situation. Startups like N26, Plum, Abeka, Meniga, Tink, and Strands provide such tools.
- Digital financial advisory tools: Provided by startups such as TheWaay and Econansdeliver, these tools give digital and automated advice to individuals based on their financial situation.
- Subscription management tools: These tools aid bank customers in managing their subscriptions in one place and are provided by startups like Subaio and Vivid Money.
- Goal-based Saving Tools: They aim to help users save money based on specific goals - they sometimes incorporate gamification elements. Dreams, Peak, and Nude are examples of such startups.
- Long-term investing and wealth-building tools: Finally, these tools enable users to build long-term wealth through investment, saving, and retirement planning are provided by startups like Moneyfarm, Scalable Capital, Trade Republic, Moneybox, and Bitpanda.
Why is cash management important?
Cash management is a fundamental element of any successful business and critical to maintaining financial health. Keeping track of cash flow, whether in corporate or personal finance, is essential to understanding one's financial position. However, managing cash can be challenging, particularly for startups or small businesses, where innovative solutions emerge. With adequate cash management, companies can avoid severe consequences such as bankruptcy, profitability loss, or even failure to pay suppliers or employees.
To prevent these challenges and remain financially stable, businesses must develop a robust system that manages cash flow, forecasts short and long-term cash needs, and makes informed decisions on cash investments. By embracing cash management practices, businesses can respond to unexpected expenses, maintain a competitive market advantage, and achieve financial stability. Every business owner and manager should prioritize cash management and implement the appropriate strategies to succeed.
Digital cash management systems: A thing of the future
Cash management is swiftly evolving as we move towards a more digital age. With the appearance of new technologies and the increasing demand for efficiency, cash management systems, or CMS, are becoming more sophisticated and seamless to provide businesses with practical solutions for better financial management.
From a mobile banking app to AI-powered tools, companies can expect to see a continuous shift towards digital cash management systems in the future, offering increased automation, tighter controls, and enhanced security measures to protect against fraud and errors. As the need for cash changes, businesses must stay ahead by embracing the digital age and adopting modern cash management systems to ensure success and growth in the financial landscape.
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