How To Be Ready For Cash Management Challenges in 2023

Cash management challenges have been an issue for many businesses since the recession of 2008. For CFOs, the situation has remained challenging despite economic recovery. In fact, cash management challenges are becoming more acute as CFOs face higher taxes on their businesses.

Here are some of the biggest challenges SMBs may face:

• Supply chain disruptions
• Fraud risks
• Inflation
• Late payments

A new PYMNTS survey reveals 12% of SMBs are concerned they won’t survive beyond 2023. Fortunately, it doesn't have to be this way. Here are 6 best-practices to stay on top of your cash management in 2023.

Cash flow forecasting is your best defense against cash management challenges. If you're not doing it, you're putting your business at risk.

Cash flow forecasting has long been considered an important part of business planning, but it became even more critical after the 2008 financial crisis when many companies found themselves in financial difficulty due to poor cash management practices. The problem is that most businesses don't have a cash flow forecast. It's either that or they have one that's so old and out of date that it's basically useless. In some cases, they have one but they don't use it effectively.

The result is that many companies are ill-prepared for the challenges they face in 2023. This is especially true for small businesses and startups that rely on personal credit cards and bank loans to fund their growth plans.

Basically, cash flow forecasting is a process that helps you predict the amount of money you’ll have on hand for the next 12 months or so. It should include:

• The amount of money coming in from customers (revenue)
• The amount going out for expenses (expenses)
• Any other money that will be spent or received in the future

To help you forecast cash flows, think about what happens in your business every day and every month. You might need to make payroll payments, invest in new equipment or pay suppliers. You might also receive payments from customers who bought your product or service, but don’t expect them until later this month or next year.

The cash management industry is evolving. The shift to digital has caused a wave of disruption in the market, but it has also brought about new opportunities for businesses to improve their cash management strategies.

Manual processes are not only inefficient but also extremely risky due to human error and lack of transparency. As a result, businesses can experience significant losses if they don't have proper controls in place for managing cash flow.

The use of new technologies like artificial intelligence (AI) and blockchain means that businesses can spend less time on mundane tasks and more time growing their business.

There are many digital solutions available today that can help you manage your cash flow more effectively. If you're dealing with multiple currencies or multiple banks, then you may want to consider using an online accounting system with built-in payment processing capabilities.

Lack of effective collection strategy for accounts payable (A/P) is one of the biggest drains on cash flow for many businesses. They often pay too much interest on late payments and loose good customers due to their inability to pay invoices on time. In addition, if you don't collect on all A/P within 30 days after invoice date, it will cost you even more money in terms of lost interest income and write-offs.

A strong collection strategy will help ensure you collect on outstanding invoices as soon as possible. This will help reduce the risk of accounts receivable being written off as bad debt and ultimately free up working capital.

Payment delays are one of the most common causes of cash flow problems. In fact, three in five (58%) SMEs are currently waiting on money which is tied up in unpaid invoices, according to recent research by UK High Street Bank.

An A/R software to help streamline your collections by automating parts of the process and giving you access to more information about each customer's payment history and history with other invoices they've paid (or not). This lets you know exactly how much time there is between when someone owes money.

If you're running a small business or working with independent contractors, it can be difficult to build close relationships with suppliers — but it's essential for your business' success. You want to make sure that when you need supplies or services, your supplier will be there for you. That way, if something happens along the way — like an unexpected delay in shipping or production — you'll be able to discuss the issue with them instead of scrambling around trying to find someone else who can help.

An efficient way to ensure you have a strong team of trusted suppliers is through KYS processes. A KYS process is an acronym that stands for "Know Your Suppliers." By knowing what their suppliers do, how they charge and how they deliver on time, you can ensure that they're not going to be a burden on your business when times get tough.

Invest in digital solutions like automatic bank feeds, bank reconciliation and reporting. These solutions will help you monitor transactions, manage exceptions and avoid manual processes that can lead to errors or delays.

Many banks offer digital solutions like mobile banking apps, online banking portals and more — which can all make managing your cash easier than ever before.

There are also third-party providers who offer similar services through their own apps or portals. These solutions are often cheaper than those provided by banks themselves because they don't have as many overheads associated with running them.

In 2023, cash will be used less often than ever before. This means CFOs need new tools to manage their companies' cash flow — tools that can handle digital currencies and make it easy for employees to pay bills electronically instead of writing checks or using cash at the register.

1. Smart forecasting methods
2. Advanced analytics platform
3. Cloud-based technology
4. Automated invoicing solutions
5. Automated invoice matching