By Sherif Zaki

Controlling cash flow is an essential part of managing a successful business and one of the strongest indicators of your ability to grow and thrive.

With disrupted supply chains, global conflict, higher energy prices, growing inflation, and a global recession being predicted by some, decisive and disciplined cashflow management is also an indicator of survival.

Businesses across the region are being challenged by macro factors beyond their control — albeit not as severely as in many other parts of the world. For example, borrowing costs and repayments on variable rate loans are soaring, as medium- term financial plans, which were written during the era of ultra-low interest rates, now need to be reconsidered.

It’s at times like these that managing cash flow has never been so important. There are steps businesses can take to rationalize liquidity and remain solvent, even when supply chains become fractured and client payments stall.

A clear view of cashflow

Bringing in digital solutions to give real-time visibility to data on day-to-day transaction management or clear cash forecasting, for example, is increasingly being seen as cost-effective in the long run.

A 2018 survey found greater satisfaction with cash forecasting among those who use automated solutions compared to those who primarily use spreadsheets.

Managing your liquidity on the go is one of the ways to exercise control over banking operations — even while operating from different countries. And keeping a digital finger on the pulse of receivables, payments, and accounts balances in various geographies can empower better business decisions.

Real-time visibility of the liquidity position of a company can enable improvements in cash management, since businesses can put idle deposits to use by investing surplus liquidity.

Supply chain financing

Suppliers who have relationships with larger buyers can benefit from supply chain financing as it allows them to benefit from the credit standing of these large companies. Usually, bigger suppliers have greater bargaining power, giving them access to cheaper credit at preferable terms.

With supply chain financing, smaller suppliers can obtain credit at more favorable terms since banks will take into account their buyer’s profile and credit standing while providing the finance. Suppliers can get cheaper funding without leveraging banking lines while buyers benefit from cost efficiencies such as not having to issue letters of credit — a saving which passes through the supply chain. Buyers will also mitigate the risk of suppliers’ inability to perform due to lack of adequate working capital funding.

If the supplier and the buyer are on the same platform, the invoices from the supplier to the buyer can be linked directly, and updated information is easily available. This also reduces paperwork and allows for better inventory planning.

Case studies show a significant reduction in the accounts payable workload and better supplier relationships.

Letting go of the receivables delay

The speed at which a business can receive money from clients can be a crucial differentiator. Businesses today seek solutions that allow them to provide flexibility to their customers to pay how they want — digitally.

Receivables solutions from banks can manage both collection and payments on a business’s behalf. A purchase processing solution can address cashflow challenges by ensuring a business is paid by customers quickly rather than waiting, essentially leaving the bank to do the waiting and allowing the business more liquidity, more quickly to meet other costs.

Making payments seamless

Whether it is government taxes, payments to port authorities to clear shipments, salaries, vendor payments or utility payments, businesses are building efficiencies into their payment processes so that they can be handled seamlessly.

With digital solutions, payments can continue unhindered even when the authorized signatory is traveling and check signing is a challenge. A digitized payments process allows greater control and, using app-based solutions, businesses can make payments using their smartphones.

Commercial cards

We’re seeing commercial card use increase across the Middle East. They can be used for anything from vendor payments to customs clearing fees and offer a no-interest period.

Virtual card and account solutions are also increasing in popularity since they eliminate the need to issue cheques and purchase orders.

They also provide visibility of all transactions, with relevant details such as value, date, merchant, origin of transaction, as well as level three data such as invoice numbers.

Bringing it all together

The road ahead may be challenging for different businesses around the region, especially those with international customers, suppliers or partners. Taking greater control and being proactive is often the difference between thriving and surviving amid uncertainty.

Taking control will help businesses track and manage payments, forecast and analyze cashflow through and monitor trade transactions instantly. Getting a clear picture of a business’ real-time balances on desktop or mobile devices is what empowers business owners to manage their company’s finances more effectively and efficiently wherever they are.

Sherif Zaki (LinkedIn) is the head of global payment solutions at HSBC Egypt.