How People and Processes Can Hold Back Cash Flow Optimization


Globalization. A pandemic. Rising customer expectations. It’s a scary world out there for finance leaders who are under increasing pressure to grow revenue, maintain healthy balance sheets, and become more insights driven in order to better manage working capital. The key to achieving these goals relies heavily on effective cash management to ensure a positive cash flow position. Ensuring that a company has enough cash necessitates transforming finance through the implementation and utilization of technology, including automating and digitizing their accounts payable (AP) and accounts receivable (AR) functions, thus streamlining the workflow and paving the way for cash flow optimization.  

Cash flow problems can threaten the success of any organization, from a corporation to a small business (although corporations obviously have greater ability to find funding than small businesses). So, CEOs and other senior finance executives need to have accurate cash flow projections. And that means having full visibility into all liabilities.

However, a recent commissioned study, The Future of Finance: 360-Degree Cash Flow Visibility and Control, conducted by Forrester Consulting on behalf of Corcentric, illustrates that intentions alone won’t enable a company to reach its finance goals. To uncover the prevailing aspirations and concerns, Forrester Consulting surveyed 633 finance leaders in the US, UK, and France (these were director level and above and responsible for cash flow management).

When these respondents were asked about their company’s plans for implementing invoice automation for AP and AR, the results at first look promising. Only 15 percent (AP) and 12 percent (AR) indicated that they had no plans to implement these technologies. The remaining 85 percent were either planning to implement the technologies or had already done so. These leaders know that without this implementation, they would have little to no visibility into the organization’s cash positions, making accurate forecasting extremely difficult and limiting their ability to identify possible funding for some key initiatives.

Finance leaders know what needs to be done, so what’s the problem?

Although there may be wide agreement on what needs to be done, accomplishing the task is a much bigger challenge. According to the study, 74 percent admit that “The disruptions of the past year made our company realize we need more holistic and real-time views of cash inflows and outflows.” That becomes difficult to achieve when a majority of respondents (57%) reveal that their organization struggles when it comes to innovating their payment processes.

What is more striking, even when implementing AP and/or AR automation solutions in the hope of providing the insights needed for strategic decision-making, 70 percent admitted that the solutions they are using provide only partial insight into their cash position. Since having real-time visibility into cash inflows and cash outflows can reduce the risk of fraud and help increase business agility, finance leaders search for ways to eliminate the roadblocks that impede their finance transformation journey.

People and process challenges are blocking finance transformation success

The challenges may differ company to company, but there are certain reasons that are common, regardless of the company or the industry. Over time (some may say, too long a time) it has become abundantly clear to finance leaders that manual and paper-based processes are hindering progress. These processes are slow, error-prone, and leave organizations open to things like duplicate of overpayments, fraud, late payments, and the inability to capture early payment discounts. An even larger toll is the discontent these issues can breed in customers and suppliers.

The study asked finance leaders what was preventing such progress in their organization and found that:

  • 51% lack payment digitization
  • 49% lack AP and/or AR automation
  • 46% admit their payment processes are too manual

Even if processes are automated, in too many organizations, functions, even within finance, are siloed. Communication and collaboration within and between business units is essential in order to have a complete view of the cash going in and out of the organization. Yet the Forrester Consulting study shows that 44 percent of respondents acknowledged that their AP and AR processes are disconnected. The continuation of siloes also results in 38 percent of leaders noting that there is inconsistency when it comes to processes for inbound and outbound payments.

But it’s not just processes that are hindering progress, it’s also a people problem. The economy right now faces an unusual problem…too many jobs and not enough people that either want them or are skilled enough to perform the necessary tasks. Overseeing the books and reconciling them at the end of the month; being able to create spreadsheets is just not enough any longer. AP and AR need to be considered as strategic partners, not bookkeepers, with the ability to work with digitization and the talent to analyze data in order to provide recommendations to help the company achieve its goals.

However, 54 percent of respondents in this study said they either had a lack of internal talent and/or the bandwidth necessary to create a real-time view of their organization’s cash position. If a company is reluctant to increase headcount but knows that finance transformation is a necessity, not a luxury, a possible solution is turning to a third-party solution provider that will work with the organization well beyond implementation (as a trusted partner) to ensure continued success when it comes to managing cash flow. In the study, 85 percent of companies said that they were either already “engaging or plan to engage a managed service partner to fill existing talent gaps and leverage best practices.”

When it comes to identifying this external partner, the first concern for companies (55%) is that this partner has expertise in their specific industry and that it can provide flexible solutions that meet the company’s specific needs (48%). There is also a desire by more than 50 percent of respondents to work with providers that offer comprehensive solutions (software, implementation, and managed services). Yet, knowing all this, a huge roadblock for 32 percent of respondents is the lack of alignment of key stakeholders on the value of modernizing existing processes and systems when it comes to payments. It’s up to finance leaders to convince these stakeholders that the expenditures are necessary and will provide a positive ROI.

It is up to CFOs and other top executives to drive the necessary changes to find success when it comes to cash flow optimization and cash flow forecasting. The challenges may at times seem daunting, but as the Forrester Consulting study shows, finance leaders know that the future of finance will rely on digital transformation of their finance systems, processes, and operations with the goal of being able to fully optimize the company’s cash flow.

Download the study.

Base: 633 director-level and above payment strategy decision-makers in the US, UK, and France

Source: A commissioned study conducted by Forrester Consulting on behalf of Corcentric, July 2021

To learn more about optimizing cash flow contact us or email us at [email protected].