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Empowering cash management through AI

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AI technologies are revolutionizing the process of cash management and cash forecasting. Implementing technologies such as Machine Learning, Deep Learning and Robotic Process Automation (RPA) into the process of cash management result in greater efficiencies, higher profitability and enhanced productivity.

Historically, payables, receivables and reporting require a significant amount of time to manually perform predictable and routinized processes, managing exceptions and disputes, and identifying risks. AI can enhance the effectiveness of these tasks while greatly increasing efficiency by reducing time demands. Additionally, subfields of AI, such as Machine Learning, Data mining and Advanced Statistical Modelling can be combined for predictive analytics. These “data stories” can be used to make more accurate decisions and forecasting.

A good cash management process is of vital importance for any organization that wants to ensure the sustainability and long-term profitability of the business, whether it is big or small in size.

To help ensure a good cash management process, SMEs focus on tactics such as spreading out payments, instead of paying all their bills at the same time. This helps them avoid draining disposable income and leaving the business at risk of failing to pay for unexpected expenses. Others include the alignment of the payroll cycle with the revenue stream, as well as collecting payments quickly by incentivizing customers to pay early by offering package deals, discounts, online payment options, and lay-by options requiring deposits.

Planning ahead for cash shortages is also of key importance for SMEs. By keeping a fund with three to six months of basic operating expenses in reserve, businesses can prepare for unexpected slow periods and emergencies. Another tactic for this purpose is using a business credit card or business line of credit to pay for everyday expenses and help bridge gaps in cash flow.

 Yet, despite these tactics, cash management is still a big hurdle for SMEs, which if not overcome can often lead to failure.

A Preferred CFO study from June 2020 showed 82% of businesses fail due to poor cash flow management. Another 79% point out that starting out with too little money is the reason they fail, followed by 73% who failed due to being overly optimistic about achievable sales and the investment required.

Additionally, the pressure that SMEs have been facing in the past year has been immense. Their ability to maintain a positive cash flow in times like these has been a more difficult task than normally.

Now, as SMEs emerge from the pandemic, they are looking for further ways to improve their cash flow and payment decisions. As the challenges faced vary per organization, tailored support and guidance that addresses their individual needs would be of great benefit to them.

However, it appears that the access SMEs have to cash management solutions is quite limited, especially compared to larger organizations. It is estimated that 75% of SMEs have no treasury function, rather they often rely on spreadsheet software, which is not designed for the purpose of managing cash and financial risk.

In a recent study conducted by Commerzbank, it becomes apparent that a growing number of SMEs are realizing the importance of cash management solutions. Out of the companies that did have a solution in place, 70% state they are using software from their bank. A further 26% use technology from software developers and just 4% had developed their own solution.

SMEs could benefit from modern FinTech management solutions that can be tailored to the individual business needs and requirements.

An interesting example of an innovative solution designed to help small businesses grow is vcita. The all-in-one business management and client engagement app redefines the way businesses interact with clients, driving more opportunities from the web, mobile, email and social. vcita includes an online CRM to manage all client communications together with online scheduling, online payments, email & SMS campaigns, lead generating website widgets, and everything a small business needs to drive more business, build financial resilience and provide great client service.

 “As the entire financial ecosystem is transitioning into digital, it is our role to ensure that the new ecosystem is inclusive of SMEs and their buy into this journey. By supporting the digitalisation of SMEs, we allow both them and their banking partners to unlock new opportunities at scale” vcita’s CMO Adi Engel indicates.

If you want to explore alternative lending mechanisms and AI based cash management platforms join the upcoming FinTech-Aviv – The Israel FinTech Association in-person event on June 10th, 2021 @5pm (IDT).

Location is: SOK, HaMasger St.39, Tel-Aviv.

Author: Tal Sharon

#Cashmanagement #ArtificialIntelligence #RoboticsProcessAutomation #MachineLearning #DeepLearning #DataStories

Register to the event here