Cash Management System: A Complete Guide | Loop

Team Outreach

April 15, 2022·7min read

In this article, we’ll share a complete 360-degree overview around cash management systems – a complete guide from us, answering the key questions – WWWH, what are cash management systems, why are they needed, who needs them and how can one implement cash management systems in their businesses. If you have been on a hunt for these answers, look no further! You’ll find your answers right here. 

With the rising trend in digital payments, economies are striving to move from cash to cashless. However, cash isn’t going anywhere anytime soon. Businesses and consumers still may prefer it for reasons. Since cash is here to stay, it would make sense for businesses to investigate cash management systems and strive towards making the process simpler, efficient, and effective. But before investing into a solution, let’s try to break down cash management systems and dig deeper into what they really are, in their true essence. 

What is a Cash Management System?

A cash management system is a fully automated solution that manages cash end-end, starting from the physical cash collection all the way up to reconciliation. It is a process of managing cash inflows, outflows and is used to manage, track, and forecast corporate cash flows. All the functionalities of a complete end-end cash management system happen through a single platform to enhance the experience of managing cash at scale. It minimizes human touchpoints and eliminates margin for error – a pain-point most often observed in traditional approaches to cash management. 

The key components of a Fully Automated Cash Management System 

Now that we know the context of a cash management system, we will now try to break down what makes up an effective cash management system. A cash management system consists of two parts, the first being hardware. 

Hardware

Cash management hardware is the physical touchpoint for cash such as a cash deposit machine – that fully automates cash counting and its storage. It uses the Internet of Things (IOT) to fully replace the error prone, manual processes of cash counting, verification and even bank deposit. The cash deposit machine (CDM or sometimes also referred to as a Reverse ATM) is an inhouse machine dedicated to handle corporate cash for the business. It serves as an inhouse bank that works 24/7. Cash deposit machines are robust solutions for accurately counting and recording cash at a point of entry. 

Hardware isn’t all there is for a comprehensive cash management system solution to work effectively. Besides the hardware, a cash management system requires quality software to work in parallel. 

Software

Having the right software is essential as the software helps in tracking, forecasting, reporting, and managing corporate cash flows. The right software serves as the eyes and ears for liquidity management in an organization. From  visualizing reports to efficient reconciliation at the end of the day, the right software helps you go through the entire cash lifecycle as effectively as possible. For some organizations and startups, a cash management software can also mean API driven workflows that can easily be integrated with any ERP and accounting software, automating transactional processes and making them transparent. 

Why is it required?

Now that we understand what a cash management system is, why do we really need a corporate cash management system in the first place? 

● It empowers organizations with data visualization capabilities and boosts accounting transparency.

● This in turn facilitates liquidity management within an organization, reducing the working capital cycle by reducing the cycle time from cash-in hand to cash in the bank, and providing cash forecasting capabilities for improved liquidity planning. 

● It eliminates time consuming processes such as cash counting, recounting, manual ledger entries, and physical visits to the bank for cash deposits. 

● Automating the cash cycle means eliminating the chance of human errors, and thereby eliminating the risk of frauds and discrepancies within an organization. 

Who needs it?

A cash management system is an integral strategic move particularly for SMEs and startups that require agile environments. For businesses that strive for growth and scalability, and are on the constant move towards digital, an operational cash management system helps in freeing up resources to focus on growth and investment capital.   

Cash management systems are also essential for growing businesses that are currently scaling up with increasing volumes of payments and data for cash-based transactions.

How to implement a Cash Management System?

To have a solution tailor made to meet business goals, it is vital to pair with expert service providers that understand your needs upfront, and empower your business with the right advice and tools to unlock your potential. Loop is the digital on-ramp for cash. We provide cash management and multimodal payment solutions for businesses day in and day out. Our API driven workflows allow businesses like yours to seamlessly integrate with internal systems that are already in place. Interested in discovering more, talk to one of us and we promise you the best answers.

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