These Technologies Are Easing the Grind of Corporate Cash Flow Reporting

Corporate cash flow reporting is not as simple as it may seem. There are challenges in ensuring the accuracy and timeliness of the reports. It is not easy to keep track of cash from operating, investing, and financing activities. Company policies on the treatment of specific cash and non-cash items also vary, creating possible difficulties in reconciling records.

Fortunately, newer technologies have made it easier to prepare accurate and timely cash flow statements. It is possible to rapidly produce financial reports that help chief financial officers, controllers, and others involved in managing the financial affairs of an organization.

The following is a rundown of some of the most important technologies employed by organizations to improve cash flow reporting. Expect these technologies to become more widely used as more companies embrace new ways of financial record keeping and reporting.

Automation everywhere
A study called “The Potential Global Scale of Financial Inaccuracies” featured in Strategic Finance magazine reveals that 70 percent of business leaders admit that they made significant business decisions based on inaccurate financial data. These inaccuracies were attributed to manual data inputting and the lack of automated controls and checks. It only makes sense for organizations to adopt automation in their cash flow reporting and their accounting systems in general.

As businesses expand to operate in multiple locations and manage diversifying product lines, record-keeping becomes a more complex endeavor. That’s why more companies are turning to automation in the cash flow report preparation process.

Many financial reporting platforms incorporate automation to expedite the collection of data from various sources. Financial information from POS systems can be directly fed into accounting databases to make sure that the data used when generating “as of (date)” reports reflect the most recent numbers.

“There are literally scores of financial reporting automation tools in the market ranging from tools for small operations to more robust and functional systems for midsize companies and giant ERP systems,” explains Deloitte’s Oduware Uwadiae in a report on financial reporting automation.

Automation in financial reporting is no longer novel, although many have yet to adopt the technology. It is fair to say that financial reporting automation has already advanced and matured over the years, so challenges on reliability, accuracy, and compatibility, among others, have already been addressed. It is difficult to imagine a future where most organizations still refuse to take advantage of automation.

Even better, many specialized financial reporting software products are designed for excellent ease of use. They do not require complicated configuration and deployment. They can also readily integrate with the financial software already being used by companies or even everyday spreadsheets. Some software providers also offer bespoke functions and features.

Automation does not only make corporate cash flow reporting easy. It also helps minimize or even eradicate errors that usually stem from the inconsistency of manual data input and mass data handling. It is an excellent solution for the manual updating of multiple spreadsheets and significant manual workarounds and data re-entry needed when mistakes in the data or calculations are detected.

Artificial intelligence

Not all details in cash flow statements involve actual cash or even equivalents thereof. Since almost all financial reporting procedures worldwide adopt the accrual system of accounting, there are non-cash items or transactions involved. These can complicate the cash flow accounting process.

Sometimes, it is necessary to make estimates or projections to come up with closer-to-precise cash flow reports, which provide better insights to stakeholders and decision-makers. In the case of construction projects, for example, AI helps organizations achieve strategic control over cash flows as demonstrated by one study published in the journal Automation in Construction.

Most construction projects worldwide do not have the luxury of drawing cash from an infinite and always available source whenever funds are needed. They rely on competent project cost management, which may not always yield the desired outcomes.

With the help of artificial intelligence approaches such as genetic algorithms, fuzzy logic, autoregressive integrated moving average (ARIMA), and neural networks, project managers can gain a better grasp of the cash infusion requirements of a project and evaluate their spending efficiency with improved precision.

Requesting excessive funds that end up unspent at the projected cadence can essentially deprive resources from other crucial business operations. Inversely, asking for cash too late adversely affects the performance of a project. The target is always to have cash when it is called for and avoid having to park it somewhere when it is not yet required.

Integrations and APIs
FinTech solutions are increasingly being used by businesses and consumers. They introduce new methods to make payments, lend and borrow money, as well as raise funds for businesses. These new solutions can add new challenges to cash flow reporting and analysis.

Some companies find it difficult to work with novel financial systems and new types of transactions. Businesses that engage in initial coin offerings (ICOs) or peer-to-peer lending through tokens, for example, may need more nuanced systems to account for capital infusions from the crypto markets.

Wisely, most software developers take integration into account nowadays from inception. They readily provide APIs to ensure the seamless sharing of data and functions between different software tools related to cash flow reporting.

APIs are more than liaisons or connectors between apps, though. Their creation has resulted in the development of the so-called API economy, as suggested in Gartner analyst Kristin R. Moyer’s special report Industry Visions for Digital Business Set the Terms of Competition.

“We live in an API economy, a set of business models and channels based on secure access of functionality and exchange of data, she writes. “APIs make it easier to integrate and connect people, places, systems, data, things, and algorithms, create new user experiences, share data and information, authenticate people and things, enable transactions and algorithms, leverage third-party algorithms, and create new product/services and business models.”

APIs enable companies to take advantage of different cash flow reporting solutions without having to replace their existing software tools or overhaul their entire accounting systems.

SaaS and cloud-based data warehousing
Just a few years ago, using financial software generally meant the use of in-prem applications. These programs had the ability to import and export data or connect to the internet to send data and reports online. This system was already more than satisfactory back then—until cloud computing and the software-as-a-service model arrived.

Applied to cash flow reporting, cloud computing has made for significant benefits. For one, it takes away the need to install client software on multiple devices. This saves organizations time, money, and effort. There is no software to update, configure, or maintain. If there are customizations necessary, users can ask for assistance from the customer support team.

Another advantage of using cloud-based cash flow report software is the accessibility of the same information, from anywhere and anytime. Businesses do not have to synchronize data across devices. The data is centralized on the cloud for networked front ends to access as needed. Organizations just need to make sure that they have proper security and access governance controls, and appropriate backup protocols, in place.

With cloud-based cash flow reporting solutions together with cloud-based data warehousing, companies find it easier to generate reliably up-to-date cash flow reports. In turn, undertaking analyses to identify and remedy cases of low profits, overinvestment, out-of-control expansion, and poor financial planning.

Towards smarter cash flow reporting
Technology helps make cash flow reports more precise and useful in facilitating business decisions. The ubiquitous accessibility of cloud-based financial data and software, as well as the efficiency-boosting benefits of automation and integration, enhance the process of preparing cash flow reports, which in turn considerably improves cash management for organizations. Moreover, the use of AI, machine learning, and low latency strategies ensure that cash flow reports provide the best representation of the liquidity and cash availability – or deficiency – of a business.

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