Dive Brief:

• Nearly three out of four (74%) financial executives say pandemic disruptions underscored the imperative to achieve real-time tracking of cash inflow and outflow, yet only 12% of them currently are automating their accounts receivable and accounts payable, Forrester found in a survey.
• “The majority of AR and AP departments tend to operate separately within finance organizations, citing a lack of resources and expertise for automating those processes,” according to Matt Clark, chief operating officer at Corcentric, which commissioned the Forrester survey. Companies that want to reduce costs, increase profits and improve the customer experience must make optimizing AR and AP systems a priority, he said.
• Survey respondents said “holistic” cash forecasting would prompt smarter decision-making (97%), streamline payments for all users (88%) and increase business agility (83%), Forrester said. At the same time, respondents believe that without a complete, real-time view of their cash position they face greater risk of fraud (52%), and are less able to adapt to disruption (45%) and identify funding to support stakeholders’ top priorities (48%). 

Dive Insight:

The global onset of COVID-19 nearly two years ago plunged the U.S. economy into its sharpest recession ever and compelled companies to hoard and more closely track cash.

The Federal Reserve and Congress reversed the cash crunch and averted a prolonged downturn by swiftly enacting record monetary and fiscal stimulus which has only begun to fade in recent months.

Despite lessons from the collapse in liquidity, nine out of 10 survey respondents are not automating their AP and AR processes, Forrester said, noting that the two functions remain siloed.

“Most companies are interested in enabling a real-time, complete view of their cash position, but few can actually do so today,” Forrester said. “Holistic cash forecasting can not only help with cash management but also contribute to better risk management, improved fraud management and more effective financial planning.”

Although 82% of financial executives want to achieve holistic cash forecasting, only 5% have the partners and/or systems in place to do so, Forrester found in its survey in July of 663 CFOs and other C-level executives, as well as directors and vice presidents, at companies in France, the U.K. and U.S. The companies’ annual revenue ranges from $750 million to more than $5 billion.

More than half of companies (57%) struggle to upgrade payment processes to meet users’ needs, Forrester said. Seven out of 10 financial executives say their cash flow systems provide only partial insight into their companies’ financial position.

“To gain the benefits of holistic cash forecasting, CFOs need to be the leaders in driving the process automation and the data integration across and between” AP and AR, Forrester said.

“The key to holistic cash forecasting is to capture data on outgoing cash payment obligations in approved AP invoices and on incoming cash receipts based on customer approval of submitted AR invoices,” Forrester said. “AP and AR invoice automation systems are the best sources of this advanced data.”