Closing the gap: cash management and your business

Cash is the ultimate SME dream and we have offered advice on several different ways to liberate your business cash flow. In the following feature, however, we speak to Hariraj Subramanian, Executive Director and Head of Cash Product Management at National Bank of Abu Dhabi, and present to you a fresh perspective on managing cash flow, controlling your business spending, increasing revenues and improving cost-efficiency. 

The reality is that cash anytime, anywhere gives businesses the malleability to scale and grow faster. Cash flow is the backbone of any growing enterprise and a cash strapped company can find itself in a downward spiral.

A financial expert from the US Small Business Administration (www.sba.gov) says: “For small businesses, cash is king. You need it to start, operate, and expand your operations, but many small business owners often have trouble managing and maintaining cash. Inaccurate cash flow analysis – or lack of available cash – can affect the everyday operations of your business and your eligibility to receive a loan. Cash flow is the movement of money in and out of your business. The process includes:

• Inflow which comes from operations such as the sale of goods and services, loans, lines of credit, and asset sales.
• Outflow which occurs during operations such as business expenditures, loan payments, and business purchases.

It’s crucial to balance these two figures and maintain a reasonable balance of cash at all times. An effective cash flow system will help you manage funds to cover operational costs and bills and help you foresee potential problems in the future.”

Understanding cash management

The implementation of a proper cash management strategy enables a business to glean a better picture of its financial situation and dip into extra resources, as and when required. Cash management is particularly significant for a growing business that is looking to expand its product portfolio or enter a new market; this is when you need to optimise cash balances and secure any additional funding. At times like these, business owners need to sit down with their CFOs/Financial managers to take control and adopt a cash management plan.

Remember, cash management goes beyond keeping track of how much money flows in and out of any business. It is:

• An essential tool for companies to make decision to free up cash flow
• Fundamental in positioning business to negotiate for more attractive financing terms
• Critical in supporting strategic approach

Businesses tend to focus on inflow and outflow, but they should ask themselves the following questions instead –

• Am I maximising cash flow – bringing in payments as quickly as possible and holding on to cash long?
• What’s the right amount of excess cash for the business to hold? Where should I invest the excess cash?
• Is the business getting the best discounts from suppliers?
• Is my company “bankable”?
• Can I secure funds when I need to, and will I get the best payment terms?

Working with a banking partner

Banks now have the ability to support SMEs by helping them manage and sustain their cash flow in a systematic manner. Rapidly changing markets and needs require that banks are now more connected than ever, via state-of-the-art technology and advanced products and services – all of which makes it far easier to provide SMEs with a seamless solution. SMEs have important operational needs that banks can meet with non-lending products that include deposits and savings, transactional products, and advisory services. Some of these products or services can effectively enable SMEs to outsource financial functions to the bank.

• Deposit and savings products

Deposit and savings products provide businesses with basic financial management tools to help organise revenues and savings. Mutual funds and other investment products provide businesses with opportunities to obtain earnings on excess capital.

• Transactional products

Transactional products facilitate SME access to and use of available cash. Automatic payroll and payment collection, debit cards, and currency exchange are transactional bank offerings that lower the cost of doing business and streamline potentially complicated processes.

• Advisory products

SMEs can benefit from help in producing reliable financial statements, developing business plans, and selecting appropriate financing products. These advisory services can improve SME access to finance by enhancing its capacity to apply for credit.

To enhance and optimise your operational needs, your banking partner can offer assistance through:

Advisory

• Thought Leadership
• Dialogue sessions
• Training
• Specialist support and advice

Efficiency

• Internet banking platforms – Free up resources used for manual payments
• Account structures – Choice of accounts with cost benefits
• Reconciliation solutions

Technology

• Internet banking platforms
• Mobile banking
• ATMs/Branch network/Call Centres
• Host-to-Host integration

Products and services

• Cash flow management
• Cheques/Electronic payments
• Payroll Payments
• Electronic collections – Merchant payments
• E-commerce payments
• Direct debits

The power of technology – NBAD’s iBANKING Channel

In addition to a comprehensive range of cash management solutions mentioned above, our team was seeking to create something that would give businesses efficiency and control, visibility and transparency, security at multiple levels, convenience, and flexibility for customisation.

To solve this purpose, we have designed iBANKING to give businesses more control and precision over their online banking transactions, anytime and anywhere around the world. Some of the key features of this new electronic banking platform include –

• Account and transaction inquiries
• Payment initiation and transfers
• Swift advice and MT940 reports
• Cheque book
• Payroll services
• Multi-bank reporting
• Consolidated reporting

There are a lot of solutions available today to help you run your business effectively and efficiently. Ensure that you are taking sufficient time to explore all the options and choosing a combination of those that suit the unique requirements of your business.