ARTICLE
Uncertain economic outlook
As the economic outlook becomes increasingly uncertain, it is more important than ever for businesses to closely monitor their realtime cash metrics, such as cash pickups and cash deliveries in transit, and working capital. This is because having a strong grasp on these financial indicators can help businesses to weather economic downturns and make strategic decisions that can improve their financial stability.
Benefits of monitoring real time cash metrics
One of the key benefits of closely monitoring real time cash metrics and working capital is that it allows businesses to identify potential cash flow issues before they become critical. For example, if a business notices that its cash collections are starting to pile up, it can take steps to improve its cash delivery and management process before it starts to negatively impact the business’s cash flow. Similarly, monitoring working capital can help businesses to identify any potential issues with cash leakages from multiple touch points due to fraud, theft, and human error, which can also have a negative impact on cash flow.
Another reason why it is important for businesses to monitor these metrics is that it can help them to make more informed decisions about their financial strategy. For instance, if a business notices that its working capital is getting tight, it may decide to delay making any major purchases or investments until its financial situation improves. On the other hand, if a business sees that its cash flow is strong, it may decide to take advantage of opportunities to invest in growth.
In addition to helping businesses to make strategic decisions, closely monitoring real time cash metrics and working capital can also improve their relationships with vendors, lenders and investors. For example, if a business is seeking financing from a bank, having a strong grasp on its cash flow and working capital can help to demonstrate that it is a responsible borrower. Similarly, investors and vendors will likely be more confident in a business that is able to effectively manage its cash flow and working capital.
How often should a business monitor cash metrics
While there is no hard and fast rule for how often businesses should monitor their realtime cash metrics and working capital, it is generally recommended that they do so on a regular basis. For example, many businesses choose to review their cash flow – cash collections, cash pickups, and cash deliveries – and working capital daily, weekly, monthly, and/or quarterly. This allows them to track any trends or changes in their financial situation and make adjustments as needed.
One study conducted by the American Institute of Certified Public Accountants (AICPA) found that businesses that regularly monitor their realtime cash metrics and working capital are more likely to be financially successful. The study surveyed over 500 small and medium-sized businesses and found that those that monitored their cash flow and working capital on a weekly basis were twice as likely to have increased their revenues in the past year compared to those that did not monitor these metrics.
Additionally, a report by the U.S. Small Business Administration (SBA) found that businesses with strong cash flow and working capital were better able to withstand economic downturns. The report analyzed the financial performance of small businesses during the 2008 financial crisis and found that those with healthy cash flow and working capital were more likely to survive the recession.
Conclusion: monitor real time cash metrics to optimise your cash management process
In conclusion, there is a strong case to be made for businesses to closely monitor their realtime cash metrics and optimise their cash collection, cash pickup, and cash delivery in transit process, especially in an uncertain economic environment. Not only can it help them to identify and address potential issues with cash flow, but it can also improve their financial performance and enable them to discover new working capital.