April 03, 2019

The hidden costs of low cash visibility

by Cash Management, Liquidity Management

Digital technologies have provided us with a level of convenience and visibility that past generations could only dream about. So why are most corporate Treasuries wasting hours of precious time on collecting excel sheets from their subsidiaries around the globe?

Sometimes I find it amazing that I can check my email from any device, anywhere in the world. I know, you have to appreciate the little things in life. Digital technologies have provided us with a level of convenience and visibility that past generations could only dream about. So why are most corporate Treasuries wasting hours of precious time on collecting excel sheets from their subsidiaries around the globe?

Imagine simply logging into your Cash Forecasting system and viewing management dashboards (that you’ve created) that give you an instant snapshot of your overall cash positions for multiple time periods. Though many global Treasuries are experiencing just that with a modern cash forecasting system, the majority are still stuck using excel.

Change is hard

Many of us have come up through our careers using excel as one of our primary business tools. Flexibility is both its greatest strength and one of it’s primary weaknesses. You can use it for just about everything from tracking your personal investments, to forecasting your company’s cash flows. However, with nearly 90% of excel sheets containing significant errors, now’s a great time to look at the alternatives.

Inaction is costly

The goal of creating a Cash Forecast in the first place is to provide valuable information and visibility to Treasury and Finance in order to make critical business decisions. The costs of an inaccurate forecast can be substantial. Let’s look at a few of those costs.

Too much cash

Cash is king! Except when it’s not. In today’s low and even negative interest rate environment, it can actually be a bad thing to have too much cash. In the case of negative interest rates, that cash is costing you money to hold. In one example BNY Mellon is actually charging its customers to hold deposits in excess of $50 million.

Source: Zero Hedge

In addition, in a low rate environment holding too much cash provides a poor ROI for your company. With too much cash in your accounts, you may not only be providing poor returns for your stakeholders, but you may actually be losing money. You also need to consider the opportunity costs of not using that cash for more strategically valuable purposes such as:

  • Paying down high interest debt
  • Share buy backs
  • Dividend payouts
  • Strategic investments such as M&A or additional R&D

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Adam Tamburello
Product Marketing Manager, OpusCapita

Adam has over 10 years of international business development experience in the financial services industry and is currently Product Marketing Manager for Cash Management and Business Network

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