Risk And Opportunity Of Non-Software Cash Flow Allocation


Cash flow allocation is one of the most critical components of the order-to-cash process and can have major impact on the ability of any organization to succeed. The manual nature of cash flow allocation can mean that an organization is subject to both risk and potential opportunities to improve their bottom line.

The primary risk associated with manual cash flow allocation is the introduction of errors due to manual entry, oversight, or misinterpretation. This risk is potentially significant due to the higher stakes of cash flow allocation when compared to other financial tasks such as the creation of invoices or other internal accounting matters. Poor accuracy in cash flow allocation can lead to both incorrect payments and incorrect reconciliation of payments, and can cause delays in the overall process, resulting in simpler cash flow and potential legal complications.

Conversely, the introduction of automated cash flow allocation software represents major opportunity for any organization. The software eliminates the manual input of data and reduces the risk of errors from mishandling. Furthermore, the speed of automated cash flow allocation allows organizations to more quickly identify best sources of liquidity, ensuring proper allocation of funds to different accounts and that creditors receive their payments on time. Automated software also allows for easier reporting of money movement within accounts, allowing for better trend analysis to identify areas of improvement and better performance from accounts.

C-suite executives should be aware of both the risks and opportunities of automated cash flow allocation software and weigh them carefully when assessing their order to cash process. While the elimination of manual entry can increase speed and accuracy it is important to note that the introduction of new software can require training, specifications, and cost. It is thus recommended that cost-benefit analysis be conducted when determining the right approach. Ultimately, automated cash flow allocation software can allow for faster and more accurate reconciliation, eliminating the risks of manual entry, and provide major opportunities when managing accounts and cash flow.