Transforming uncertainty into opportunity: how banking solutions can help you make your cash flow work harder

How can banking solutions help both strengthen and enable your operations to maximise cash and increase return?


Trading conditions are changing rapidly – even more so in the wake of the COVID-19 pandemic – and that’s impacting manufacturing and producing businesses on a global scale. So how can you ensure sufficient cash flow to keep your business healthy?


As a finance professional, you’re likely already looking at strategies to minimise inventory, ensuring cash isn’t tied up in stock and keeping cash in the business for longer.

But how can your banking partner help you to further open up new sources of value for your business.

We spoke to manufacturing and producing businesses around the world to see how they use banking solutions to optimise their cash flow cycle. We wanted to know how they maximise their accessible cash and make sure they put it to work – investing in new processes, technology and innovation. Because, as the treasury manager of a large technology manufacturing business put it, “Cash that’s idle – just sitting in an account – doesn’t match our needs.”


Are you investing enough in technology to enhance visibility of your cash position?

Invisible working capital is unusable. Businesses are increasingly investing in enhanced solutions that help provide a single holistic view of their global operations, giving them real-time data on their working capital and cash position, and allowing them to allocate cash across the business in the most optimal way.

Often, though, gaining complete visibility of your cash position across dozens of different currencies – and perhaps hundreds of different business bank accounts – is hard to achieve. As the finance director of a large manufacturing corporation said, “All pooling of cash is virtual – we have pound and dollar accounts in the UK, and our US-focused business is done in dollar accounts. The key thing to us is visibility of the accounts: where is the cash, and how can we move it around if we need to?”

Businesses that carry out reconciliation, data aggregation and payment investigations manually are using up time that could be better spent planning how best to use cash. This is where digitisation and automation solutions can make things easier, helping to free up your treasury team to focus on strategic decisions for the future of the business.

One of our biggest challenges is forecasting. We still rely on a very traditional way of doing forecasts, which is to connect all the input from many local sources. I would say cash flow forecast accuracy is still a challenge.

REGIONAL TREASURER, GLOBAL AUTOMOTIVE MANUFACTURER


With all the information you need in one place, a banking platform with a consolidated interface can improve your global cash management. The latest digital platforms help you keep track of payments, receivables, liquidity and the changing value of your assets in one convenient place. Plus, enhancing your visibility and control with cross-product dashboards and portals gives you:

  • Real-time payment systems for a single view of multiple platforms and up-to-date account information, transaction and settlement reports, statements, daily reconciliation and foreign exchange (FX) transparency
  • Cash analytics capabilities for an all-in-one view of your cash and investment data over all your accounts. This also gives you information about things like counter party or country exposure, time series for inflow and outflows, operating balances and core reserves
  • A simplified, centralised overview of balance positions across multiple currencies, account locations and financial institutions
  • Self-service capabilities that allow you to enquire and amend the criteria of your existing cash solutions and online structure
  • More accurate cash flow forecasting by integrating with ERP or treasury management systems to share data sources.


Do you know which solutions best suit your specific cash requirements?

As well as optimising your internal finance processes and enhancing your visibility to maximise and forecast cash, you might find it useful to improve your bridging finance approach, too. This could help you meet your operational obligations better – particularly if you have long cash conversion cycles.

Alongside traditional overdraft, credit and lending products, there are also working capital and funding solutions available. What’s more, they can help you achieve better flexibility and cost efficiency through financing that scales with your business. And, with the right blend of trade, currency and cash management solutions, you can reduce your dependency on traditional, inflexible lending products.

To further optimise working capital across your business and subsidiaries, and release liquidity into your business when and where you need it, consider sales and supplier finance solutions. These give you fast access to cash in your supplier and sales chain by creating global programmes that benefit both you and your partners. This includes solutions like receivables finance, supply chain finance, trade and working capital loans and documentary credits or collection. Cash management solutions like global payables, cards, receivables and clearing services also help you maximise control over cash flows.

To really get to grips with cash management, you might also want to consider a corporate card programme. Beyond giving you greater visibility into company-wide spend, a well-designed corporate card programme can also be a vital component to your overall global liquidity and cash management strategy.

It’s also worth considering trade or working capital loans. These bridge the gap between paying your suppliers and receiving payment from your buyers, and you’re able to agree loan repayment terms in line with your trade cycle for maximum convenience.

There are also import loans – otherwise known as buyer loans – that give you short-term, trade-related working capital for your international purchases. With these, your bank pays your suppliers directly. Then, export loans, or seller loans, are available to provide upfront financing to help you buy raw materials and manufacture goods, with funds made available to you based on a letter of credit or purchase order from your buyer.

Our projects are typically structured on a milestone basis, which made securing a traditional invoice financing solution quite difficult. An export loan facility that gives us a working capital line on a contract-specific basis was the ideal solution. Taking export loans in the currency that I need them in is just one less problem to worry about.

GROUP FINANCE DIRECTOR, MACHINERY PARTS MANUFACTURER


Which finance products could make you agile enough to cash in on changing conditions?

If your business experiences fluctuations in costs and revenues throughout the year, it’s worth thinking about combining a number of financing products to create a solution that’s bespoke to your needs.

You can combine working capital finance and cash management solutions with a revolving credit facility (RCF). This gives you access to pre-established maximum funds that your business can use whenever it needs to. This type of credit is especially useful for manufacturing businesses that may experience sharp fluctuations in cash flow due to seasonality or complex contracts, or large expenses for materials and equipment.

Our revenue is seasonal, with a peak sales period each year. When it’s slack retail, we still need the cash for manufacturing. When doing planning, we know that in certain months we will be low on cash. We forecast cash and try to smooth out the peaks and troughs. We cannot not manufacture.

FINANCE MANAGER, MID-SIZED LUXURY GOODS MANUFACTURER


RCFs are often combined with a cash sweeping provision, whereby excess cash flows are used to pay off outstanding debt. That way, spare cash can be used to repay the RCF as a priority, therefore minimising the cost of borrowing. Plus, RCFs can use assets as collateral, making the overall amount that you borrow flexible, since it’s based on the value of the asset. That, however, requires high-quality data. As the finance and purchasing lead at a mid-market manufacturer of logistics equipment told us, “Our ‘revolver’ credit facility is asset-backed. It is crucial that our sales and delivery data is accurate. If we cannot evidence with our invoices, or our reference numbers don’t reconcile, we don’t get the benefit of our sales in our revolver.”

If your business is cash-rich but unable to redeploy all its excess funds, you could also invest it with integrated cash and investment management solutions. Liquidity investment solutions (LIS) sweep surplus cash from multiple different accounts to and from market fund investments, and link usable cash with an investment portfolio. This gives you access to a wide range of asset management classes and investment opportunities – both short- and long-term – and even allows you to access sustainable investment projects through ‘green deposits’ that support your company’s environmental agenda.


Is it time to think differently about cash flow banking solutions?

Finance and banking solutions are there to empower your business; to help you trade with confidence, pursue growth and invest in innovation. Working with the right partner for your business can be invaluable when it comes to global trade, cash and FX management.

So, is it time your business explored new technology to help enhance its cash position? Are you exploring the solutions that are tailored to your needs? And do you know which finance products will help keep you flexible and nimble like you have to be?

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