The first smartphones were released in 2007, and only 15 years later, we have phones that can do much more than simple calls and text messages. Most people are now fully equipped with a GPS device, a camera, video recorders, and multiple web browsers at all times; some people are even running businesses off their phones.
The same goes for managing cash flow — something that most small and medium businesses and accountants struggle to navigate even today. As we move from pens and paper to the digital world of Web 3.0, many tools have been developed for SMBs and accountants to manage their cash flow better.Â
The good news is that SMBs and accountants that have adopted newer technologies are seeing tremendous benefits. The bad news? Not every business and accountant has been the quickest to adopt these new technologies.
If you are wondering where to start or want to know what everyone else is doing to improve their cash flow, we will be detailing everything you need to know to start identifying how to improve how you manage your business’s cash flow.
Real-time payments
Paying and getting paid is one of the most significant factors contributing to a business’s financial health. One of the most common methods to send and receive funds between companies today is through the Automated Clearing House, a system established in the mid-1970s. It might be surprising to some that despite how much has changed in the past half-century, we still rely on the same ACH technology to move $29 billion annually nearly 50 years later.
That is all changing quickly, however, because real-time payments technology has taken the world by a whirlwind. As the name suggests, it allows users to pay and receive money in real-time, making moving money around much easier.Â
While on the surface, real-time payments seem like just another way of sending or receiving funds, their real impact and implications in the business space are endless: Businesses can hold on to money for longer, receive payments from clients instantly instead of waiting for days or weeks or pay vendors on the spot to ensure smooth business operations, to name a few.
Real-time payment is not entirely new, as the Asian market has heavily utilized such technology for a while. With how much it helps businesses manage their cash flows, it will not take long until we see real-time payments become the dominant way of sending and receiving funds in the American market.
Automated cash flow forecasting tools
Cash flow forecasting has traditionally been a labor-intensive, almost mysterious process, completed exclusively by accountants and bookkeepers on complicated-looking spreadsheets. That has begun to change, as many financial institutions and financial technology providers are starting to offer cash flow forecasting and management software that automates the entire process down to seconds.
With the increasingly competitive market, many financial institutions are now moving to provide more specialized cash flow forecasting tools that streamline the forecasting process. Modern technology such as machine learning and artificial intelligence power cash flow forecasting with more in-depth and contextual analysis than ever, providing small businesses with deep insights to make informed decisions.
A recent survey showed that 55% of businesses forecast weekly or daily, and 64% are willing to invest more time to improve their forecasting accuracy. With such high demand and better cash flow forecasting tool options being presented, we will likely see a surge in the adoption of specialized, automated cash flow forecasting tools in 2023.
Auto-reconciliation on the cloud
Closing the books with manual reconciliation is time-consuming and often causes problems for small businesses. According to a Sage survey, 93% of companies are under pressure to close their books.Â
While predecessors claim they provide auto-reconciliation to solve this issue, most require significant manual intervention, defeating their purpose of automating the reconciliation process. The good news is that as businesses move to the cloud, auto-reconciliation is becoming the new norm instead of a pipe dream.
Now, advanced cash flow management solutions can connect to cloud accounting, banking and commerce platforms to facilitate auto-reconciliation. Manual reconciliation is slow and error-prone. With auto-reconciliation, businesses can reduce human error, ensure consistent results despite the large volume, and save time in running the business. As the technology matures quickly, companies will soon flock toward tools that can help them automate the reconciliation process.
Staying ahead of cash flow in 2023
Cash flow is something that many SMBs and accountants have struggled with for a long time and using outdated methods to manage cash flow is like bringing swords to a gunfight. With the advent of technology, there are more tools than ever before at business owners’ and accountants’ disposal. Real-time payments, automated cash flow forecasting, and auto-reconciliation tools can provide immense value to a company and improve cash flow. Businesses that haven’t considered leveraging them should start doing so to stay ahead.
