The Five Commandments of Business Cash Flow Management！

Business Cash Flow Management

Inflation, supply chain obstacles, and labor issues increase the risk of cash shortages, especially when businesses are unable to pass on higher costs to their customers. Coupled with inefficient processes, inadequate controls, and inaccurate information, managing cash becomes even more difficult—leading to once-successful companies falling into distress. However, these issues are controllable under the strong leadership of a Chief Financial Officer (CFO) and with the support of technology.

Real-Time View of Cash Position

Intelligent cash management decisions require access to real-time financial data, including current balances of all accounts and a complete record of all bank transactions. A robust accounting system can track this information and make it centrally available for management to work from a common data source. In NetSuite, the Cash 360 cash management dashboard adds more insights, allowing real-time monitoring of cash flow trends and tracking of total cash, accounts receivable, and accounts payable balances.

A centralized accounting system also aids in account reconciliation and the application of customer payments upon invoice issuance. Business leaders can gain a better understanding of their current cash position. Finally, daily and/or real-time bank feeds eliminate the need for manual data entry, saving time and ensuring accuracy.

For example, NetSuite's automatic bank feeds import account details nightly and allow for intraday updates, so finance teams can stay informed about which transactions have cleared and how much cash is available at any time.

Reliable Cash Flow Forecasting

Three factors affect the accuracy of forecasting: the quality of the data used, the validity of assumptions in the forecast, and the amount of time since the forecast was updated. To improve accuracy, first provide centralized access to real-time financial, sales, and other relevant data—preferably within an Enterprise Resource Planning (ERP) system.

Next, eliminate unsupported assumptions from the forecasting process. For instance, companies should use their own historical transaction details rather than estimating receivables based on intuition or applying standard percentages to open accounts receivable. Leaders should also consider non-operational cash flows, including planned capital expenditures, incremental venture investments, or other activities.

Finally, by automating cash flow forecasting, companies can update more frequently, which improves accuracy and saves time. NetSuite's Cash 360 dashboard covers all of the above, displaying a rolling six-month cash flow forecast based on current transactions and historical averages of income and expenses.

Data-Driven Budgeting

Instead of setting performance goals and then creating plans, use a data-based, bottom-up budgeting approach that provides more consistent and predictable results. Start the process by assessing the current business environment and reviewing past initiatives to determine which activities may generate the most value, which allows leaders to better understand which outcomes are actually achievable so they can allocate budgets accordingly.

NetSuite's planning and budgeting features automate the planning process, save time, and improve data quality by eliminating the need for cumbersome spreadsheets. It offers complex modeling capabilities, forecasting analytics, and a powerful calculation engine, enabling financial planners to quickly build and evaluate multiple hypothetical scenarios, making wiser data-driven budgeting decisions.

Strong and Flexible Financial Controls

Well-designed internal controls bring greater stability to an organization by holding individuals accountable for their actions and ensuring compliance with government regulations and accounting standards. Many business management solutions help establish this compliance by building review and approval workflows into processes including accounting, sales, procurement, and staffing, providing managerial oversight and reducing the risk of financial fraud or errors.

In NetSuite, configurable workflows in areas such as procurement, accounts payable, and expenses can help companies avoid overspending by enforcing approval policies and holding managers accountable for budgets.

Proactive, Automated Collections

Establish effective collection processes using a business management system to control Days Sales Outstanding (DSO). These systems can automate customer communication to ensure consistent follow-up on overdue invoices and reduce write-offs.

Automation can even improve on-time payments by reminding customers of due dates. For example, NetSuite's automated dunning letter solution increases on-time payment rates by reminding customers before bills are due and helps avoid write-offs by maintaining consistent, proactive communication with delinquent accounts.

Hitpoint Cloud (Shanghai Netsun Information Technology Co., Ltd.) is headquartered in Shanghai, with branches in Shenzhen, Beijing, and Nanjing. The Hitpoint Cloud team has been focusing on Oracle NetSuite products since 2009 and is a star partner of Oracle NetSuite for many years, providing cloud computing solutions in various modules including finance, distribution, project management, and e-commerce. With extensive experience in the implementation, localization, secondary development, and training of Oracle NetSuite, it supports the business operations of customers with a team of over a hundred implementation developers, committed to unleashing the potential of every customer in the cloud era, achieving greater success, and helping enterprises "win" the future with intelligence.