The importance of having all your cash statements in real time

4 min reading
Treasury / 10 September 2020
The importance of having all your cash statements in real time
The importance of having all your cash statements in real time


The concept of real time cash flow is beginning to catch on in the corporate mindset. This process is being driven by much more favorable regulation, especially PSD2, technological advances and the spread of instant payments and transfers.

Financial APIs are helping to gradually shift this paradigm by opening up the banking infrastructure and providing the necessary tools for third parties to develop new applications or integrate them into their own environments. This new model has advantages for companies’ cash flow. These companies’ cash flow managers can explore innovative solutions, adapted to their needs and, above all, in a much more agile way.

The current reality of cash flow in companies

Currently, cash flow managers collect banking information through P2P connections, usually through SWIFT channels, between their companies’ ERP systems and the bank where they have opened their bank accounts and contracted their services. Information flows regularly and cash flow statements are updated several times a day.

Increasingly, however, cash flow managers are demanding a much more up-to-date flow of information. According to the Euromoney Treasury Non-Stop study, 77% of cash flow managers believe that real time cash flow management will have a high or very high impact on their business systems, and only 6% of the interviewees think this will not have any impact on their business.

APIs will play a pivotal role in this process. More than half of the interviewees in this report (57%) plan to use APIs in their cash flow processes in the coming years, particularly in the area of liquidity management. But real-time cash flow capacity is a lot more than transferring funds or consulting real-time cash flow statements. In fact, two out of three cash flow managers claim that they would also use services to automate currency conversion and hedging if they could access them.

Given this situation, there is no doubt that more and more companies will adopt new systems to receive their treasury information. A gradual process where APIs and new developments will play a key role.

The advantages of having real-time cash flow statements

Although being able to work with instantaneously updated information allows an objective and real evaluation of our cash flow position at any given time, this new paradigm provides additional advantages.

Instant and centralized daily liquidity

Thanks to the potential of financial APIs, cash flow managers can access solutions adapted to their needs and in a much more agile way. This allows them to have a much clearer overview of their liquidity positions.

One of the most attractive options that cash flow managers have is to create virtual accounts to replace all the company’s cash pooling accounts with its bank. With this option, the company can have multiple virtual bank accounts that simulate the physical accounts and feed a single central bank account which would instantly show the company’s overall cash situation.

This is especially important in business groups that have several companies dependent on their parent company, and need to make continuous sweeps of bank data to centralize all cash information in a single account

Accounting and reporting a lot more up-to-date

The process of receiving cash in real time is much more transparent and simpler, making it easier to manage liquidity and risk dynamically. In fact, since banking information flows in real time, ERP can perform the accounting actions needed to consolidate this information in a much more up-to-date way.

This is especially important for bank reconciliation, i.e., cross-checking bank information against cash-flow information. With current systems, information is received and consolidated on a daily basis, but the information at the end of the day is not necessarily the same as at the beginning.

This way, the reporting tools will have much more accurately updated information that accurately shows the company’s liquidity situation.

Better cash flow forecasting

Tesorería en tiempo real

PwC’s latest Global Treasury Benchmarking Survey, shows that three out of four cash flow managers still have serious problems in accurately predicting their company’s liquidity. This often happens because they do not have all the cash flow information available at the time it is needed.

Cash flow forecasting is one of the processes that could most benefit from real-time cash flow. When coupled with the right big data tools and appropriate artificial intelligence, cash flow managers can view relevant information that can be used as a historical data model for liquidity forecasting.

Thus, cash flow management can anticipate a certain client’s information about its payments, the patterns followed by certain clients and suppliers, their influence within business liquidity and, in general,all the information needed to create more accurate and faster cash flow forecast reports.

Real-time currency hedges

As companies expand internationally, new cash needs arise, most of which are related to exchange rate risk. International payments mean exposure to a new currency, whose volatility can impact the company’s revenues. However, enterprise resource planning (ERP) programs do not always update this information in real time, which can have a significant impact on a company’s balance sheet.

This is why the ability to analyze and identify extra-EU transactions can help minimize the value of intraday volatility and exposure to a new currency. The more up-to-date this information is, the better it can be managed to obtain the actual cash flow situation.

APIs, combined with other artificial intelligence tools, can execute hedging operations according to pre-defined rules, for example, responding to exchange rate fluctuations in real time. This is useful both to obtain the best hedging options with minimum delay, and also to ease the burden on cash flow managers who might then be able to spend more time on other higher value-added activities.

In short, these are some of the most important benefits of real-time cash flow, both in the short and long term. Both the use of APIs and the collaboration between all the parties involved will be essential to bring these solutions to the market.

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