Releasing cash flow fuels much-needed business resilience

The coronavirus pandemic has caused chief financial officers and businesses leaders to urgently reset their expenditure, review their capital and operational expenditure costs, and optimise their finance functions. It has also not only impacted sales in most companies, but also highlighted a significant issue they were already facing, yet is amplified in a crisis: lack of resilience in their cash flow.

Cash is the lifeblood of any organisation. And from a cash-flow modelling perspective, businesses have historically relied on the treasury department to predict and, when necessary, make loan provisions through their banking partners to cover any working capital exposure. Given loan availability has been fairly free and interest rates low for a considerable time, this wasn’t a problem. But in the wake of the pandemic, which has diminished access to loans, it has created great challenges.

Running parallel to this issue is what Kevin Kimber, chief executive of accounting software firm Rimilia, calls a “hidden secret”, which is that while businesses scramble for external funding to shore up liquidity, a large source of capital exists in their own organisation. The biggest asset on most companies’ balance sheets is debtors and vast amounts of cash could be released if businesses were able to get paid quicker and on time by their debtors.

A large source of capital exists in organisations biggest asset - their debtors

“For one of our customers, before they achieved automation in this space, it would take them on average 93 days to collect their cash and each day was worth $150 million,” says Kimber. “So billions of dollars they were owed was just sat out there. Or, even worse, they’d already received the money, but they didn’t realise it because it was unallocated.”

With COVID-19 as a backdrop, this means the cost of doing nothing has never been greater. Yet while companies have invested significantly in automating many parts of their business, such as their manufacturing lines and sales and marketing processes, and even certain finance processes including accounts payable, only 3 per cent have automated their accounts receivable. Nearly all organisations are still doing it manually on spreadsheets.

Now, however, these inefficient, archaic processes can no longer be ignored. They are directly prohibiting the resilience businesses are craving during the pandemic crisis and for many it is the difference between success and survival. At any one time, there is about a trillion dollars of cash sat on global balance sheets unallocated and companies rely on people in call centres trying to understand, manually, where it has come from. This not only creates costly inefficiencies in finance, but also friction in the customer relationship.

“The importance of retaining customers and managing them effectively is more important than ever,” says Kimber. “Having cash unnecessarily tied up, which customers have paid you in some cases many weeks before, is then stopping that customer buying more from you. These manual processes have friction on the backend in terms of the admin functions and also the frontend in terms of customer retention because, if your customer is working with multiple suppliers in the same space, and you’re the only one that’s still doing it manually, then clearly they’re going to be buying more from your competitors.

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“Intelligent automation of accounts receivable processes is crucial to streamlining your finances and releasing cash flow. But it’s also so important to ensuring companies can deliver the very best customer experience and support they can. Given the cost of new capital, businesses can’t afford to let that existing capital sitting on their balance sheets go to waste. They can’t risk creating additional, unnecessary friction in their customer life cycle. So the opportunity that accounts receivable automation presents is significant.”

By automating the complete accounts receivable process, Rimilia’s software eliminates unallocated cash, reduces manual activity by an average 70 per cent and achieves best-in-class matching rates. The company provides intelligent, finance automation solutions that enable organisations to control cash flow and cash collection in real time. The software solutions use sophisticated analytics and artificial intelligence to predict customer payment behaviour and easily match and reconcile payments, removing the uncertainty of cash collection.

Rimilia’s technology drives the most efficient end-to-end process from customer to the bank, typically reducing an organisation’s unallocated cash by around 90 per cent, without any human intervention at all. Most of Rimilia’s customers achieve full payback inside six months, while many do inside three months. With automation taking care of accounts receivable processes, the relevant teams in the finance department can be redeployed elsewhere, such as focusing on vital innovation projects or streamlining other functions in the business.

“We unlock this cash and enable businesses to use it to give themselves the oxygen to move forwards,” says Kimber. “With the huge societal and business shifts we’re experiencing, clearly this can also be a catalyst for change in times like this. If you go back to 2008 and the last financial crisis, in many cases the businesses with the strongest resilience had the most control over their processes because they had applied automation.

“The impact it can have on cash management and, therefore, overall resilience is huge, which is even more pertinent as we face the threat of a second wave of coronavirus or indeed whatever the next crisis is.

“It’s clear that companies that do not choose to invest in automation are going to be left behind. For resilience and the future of work, automation sits side by side with people. It removes the manual, mundane and archaic tasks, which technology is fundamentally better suited to delivering, and frees people up to work on real business-impacting and growth projects.

“In the same way that technology has been an enabler to work during lockdown, it has also been an enabler in many other areas prior to lockdown. Automation drives out the manual processes that rely on large numbers of people in large offices, providing flexibility to organisations and their people. Accounts receivable presents a huge opportunity here.”

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