Cash flow forecasts lack depth - study

Cash flow is an important part of growth and expansion.

Cash flow is an important part of growth and expansion.

Regardless of whether you are the biggest or smallest business in Australia, the issues of cash flow are always close to the top of the agenda. Cash flow is king for growth and development, and so it's a concept that is worth keeping a close eye on.

However, given the results of a 2015 survey from Visa, this is definitely an area that needs drastic improvements.

Polling chief financial officers and corporate treasurers of leading companies across the world, including a number from Australia, the Visa Cash Flow Visibility Index found that cash flow was the key to business profitability.

Despite this fact, over 70 per cent of the Australian organisations are unable to forecast cash flow 60 days or two months ahead.

Head of ‎Commercial Payment Solutions for Visa in Australia Ian Boyd explained the value of cash flow to businesses.

"Cash flow visibility is key to the judicious management of liquidity and risk by corporates. For CFOs and treasurers this visibility allows them to make accurate decisions on reinvestments or expansion of their businesses, to ensure long-term growth and profitability," he said.

Mr Boyd continued by stating that the problem might lie within how businesses track and manage debt payments

"The fact is there is an opportunity for Australian corporates to adopt business-to-business (B2B) payment systems that are more digitised. Australia is leading the way in many digital payment areas but it is clear Australian corporates could benefit from improved processes."

The Visa study also confirmed that data entry in relation to cash assessments and analysis reports is taking up a considerable amount of time. Australian businesses are wasting around 116 hours per week completing these tasks, well below the regional average, but too high to be making any cash flow progress.

Overdue payments

Couple poor management with higher debtor numbers and Australian businesses will struggle to grow in the future. According to the latest Trade Payments Analysis from Dun & Bradstreet, 44 per cent of all commercial invoices are paid after contracted dates. 

CEO of Dun & Bradstreet in Australia & New Zealand Gareth Jones noted that this fact "withholds significant amounts of money from the financial system and places financial strain on supply chains."

Given the issues that can arise from poor cash flow systems and late payments, Australian businesses would be wise to consider working with a professional business debt recovery provider.

At Commercial Credit Services, we are committed to ensuring that your cash flow is positive and you are able to make expansion dreams a reality.

ENQUIRE ONLINE

Powered by ChronoForms - ChronoEngine.com