Cash flow management software, otherwise known as cash management software, is used to track, report, and forecast cash flow. It can be used for small, simple companies or large, multinational corporations. Its modules typically include cash tracking, reconciliation, liquidity management, in-house banking, electronic bank account management, analytics, reporting, security, and compliance.
Cash management software integrates with ERP, accounting, and bank applications to provide a more comprehensive cash management platform. Such systems often include powerful features such as data visualization capabilities to see details in easy-to-understand ways, cash management automation to reduce the human time commitment for various tasks, and forecasting to provide accurate projections to help with budgeting and planning.
Why Should You Have a Cash Management Tool?
Even very small operations should have a cash management tool. Some would argue that other types of applications such as Excel work fine for this purpose, but how do you manage cash flow in Excel in a way that supports the overall business? Excel can work well for forecasting costs and income, especially prior to launching a company. However, once it starts, a spreadsheet application isn’t enough to meet business needs.
Benefits of a cash management tool include the ability to track available cash, easily perform cash flow maintenance activities, and make smart decisions based on knowledge of cash assets. Such advantages translate to avoiding costly loans and debts, making payments on time, reducing the needed human resources, and spotting business trends that can lead to sound choices.
Key Features of a Great Cash Management Tool
The best cash management tools include basic tracking, reporting, and forecasting elements as well as more sophisticated features, such as those listed here.
Cashflow tracking
Cashflow tracking is the ability to understand what funds are coming in, what payments are going out, and the cash balance at any given time.
Alerts
Companies with numerous vendor relationships must be able to monitor payment terms to avoid late payments and resulting fees.
Cashflow projections
While it’s not always possible to know how much money will be incoming and outgoing at any given time, a cash management tool can use likely scenarios to determine a company’s future cash position.
Automated bank reconciliation
You can link your cash management tool to bank account software to enable automated reconciliation, reducing human time investment.
Customization
Even commercial off-the-shelf (COTS) software should provide the ability to customize aspects, including categories, entities, currencies, and the information included in reports.
Visualization
Cash management software should allow you to create reports, charts, graphs, and other visual representations to help you better understand relationships between data elements.
Multi-user operation
The application should enable users to grant access to employees and other stakeholders who need to understand the company’s finances.
Security
The ability to grant access to multiple users must be balanced with security, given the sensitive nature of the data involved.
Compatibility
A cash management tool should be compatible with other applications already in use within the organization.
How to Choose Great Cash Management Software for Your Business
The best cash management systems are those that include the features listed above, are compatible with your existing technology, and are easy to learn for the people who will be using them the most. Additionally, look for providers that offer a high level of customer service and support for the installation process and beyond. Ideally, they will also provide a detailed demonstration and trial period so you know the application will work for your company for the long term.
Before settling on an application, find answers to the following questions.
- Is the information loaded in real-time or only at the end of each day? (Real-time information helps you make more informed decisions.)
- How robust is the reporting feature? (Make sure the reporting reflects the information required by various stakeholders.)
- Is the software designed to help meet regulatory requirements? (This feature is a must, particularly in certain industries that deal with sensitive data.)
- Is the system designed to grow with your business? (If not, you may find yourself having to go through the process of choosing another system in a few years.)
- How customizable and flexible is the application? (As your company changes, you might have different needs in terms of currency, report items, and other elements.)
- Is the platform designed to integrate with bank account, ERP, accounting, and treasury software? (To ensure a complete picture of the company’s financial position, the answer should always be yes.)
If your needs are more specific, you may choose to opt for a custom cash management system. For example, you may need to perform tailored liquidity calculations or cash flow forecasting based on unique parameters. Also, your company may be subject to specific regulations that COTS cash management applications don’t address. Additionally, COTS applications may not integrate well with your other technology, such as finance or accounts receivable and payable systems, or may not scale fast enough for your growing business.
