Improve Liquidity and Fuel Growth with Cash Mobilization
According to a leading publication, companies worldwide have a whopping $1.5 trillion trapped on their balance sheets. That’s a huge amount of cash that is immobilized and rendered effectively useless. It generates barely any interest income, if any, let alone being available for investments that can drive strategic business value.
Clearly, many organizations suffer from this challenge – immobilized cash, and it is up to CFOs and treasurers to mobilize this cash so that it can be effectively utilized. The good news is that with the aid of technology and process improvements, it is possible to unlock immobilized cash to improve business operation and take advantage of market opportunities.
Let’s take a look at the steps to mobilize cash:
1. Automated System for Better Visibility
Organizations are capable of tracking only 80% of their overall cash across the organization. The rest remains untraced and undetected, practically invisible. Needless to say, this is an enormous amount of immobilized cash. This problem can be surmounted through a treasury management system that automates bank connectivity.
Cross-border immobilized cash also is a matter of great risk due to currency volatility. Currency can be significantly devalued on account of geo-political and economic upheaval. An automated system that provides global visibility so you’re aware of how much cash you have, and what it is actually worth.
2. Accurate Cash Flow Forecasting System
When organizations lack an accurate cash flow forecasting system, it can lead to two possibilities: Stocking up more cash in the organization than necessary, as treasurers are unsure of how much to deploy, leading to immobilized cash in the enterprise. Or, inefficient cash mobilization leads to faulty decision-making with regards to deploying cash into unnecessary investment pockets.
With efficient and accurate cash forecast, CFOs and treasurers can gain valuable insights on the present as well as future cash balances. They can keep track of both the surplus cash and cash flow timing to make better cash flow and liquidity decisions. Accurate forecasting also hedges against currency volatility and liquidity.
3. Cash Management Structures
Organizations should adopt various cash management structures like in-house banking and cash pooling mechanisms for intra- and inter-country cash mobilization. In order to align with regulatory compliance and taxations, organizations should employ the right amalgamation of both the physical and notional pools. This ensures ease of liquidity, cost savings and smooth mobilization of cash.
What Can You Do with This Unlocked Cash?
Once CFOs and treasury teams unlock cash, they can put it to better use for their organization. Here are 5 ways CFOs can drive greater business value from mobilized cash.
Invest Cash into New Growth Opportunities
The treasury department can co-ordinate with the financial planning and analysis team to analyze market trends for financing and strategizing for future business expansion. This requires identifying emerging opportunities and new markets to invest in so as to drive growth. In this scenario, treasury surpasses becomes a partner to the organization, supporting growth.
Value to Shareholders
Elevating value for shareholders value is one of the crucial goals of any profitable organization. Treasury must act in unison with the CFO and management to devise efficient strategies to give back the due dividends or stock buybacks to the shareholders. In such cases, treasury can offer analysis that makes decisions on shareholder value easier and more informed.
Income from Interest
An organization holding surplus cash can opt for long-term investment opportunities for greater returns in the form of high interest income. This practice was common-place for insurance organizations, and is becoming more main-stream for various types of enterprises having notable amount of underutilized stock of cash over time.
Returns from Payments Programs
When treasurers collaborate with procurement, supplier payment programs like various discounting programs can be identified and implemented. This can earn high net returns of 8-21% annual percentage rate (APR).
In today’s exceedingly competitive environment, cash mobilization acts as an oasis to fuel business growth and development. Organizations must have an efficient system of that provides accurate visibility and forecasting of cash flow and liquidity to enhance cash mobilization. This opens up avenues for potential investments in emerging markets and other growth opportunities. With an integrated platform featuring clear visibility, as well as automated cash flow forecasting and cash management structure, it is possible to optimize cash mobilization and maneuverability.
If you’re looking for a solution to cash mobilization, V-Solve can help you. Our next-gen, cloud-based solution T-solve, provides powerful cash and liquidity functionality, including cash flow forecasting capabilities. Please contact us to learn more and we would be delighted to understand your business challenges and help you conquer them.