Cash Efficiency—How to Get the Most Out of Your Cash
This article is written by Palm A common issue we hear at Palm is that businesses are aware of their idle cash but lack the time and resources to manage it effectively. This can range from the minor inconvenience of maintaining a small balance in an unused overseas account to a larger problem of having unutilised funds scattered globally. Treasurers have always strived to have their cash in centralised accounts, whether using cash pools or virtual account structures. However, in more recent years, with the rise of interest rates, this topic has been given much airtime in board meetings and leadership conversations, as idle cash represents forgone interest income. This blog explores the concept of idle cash, its origins, and how we are on a mission to give treasurers the tools they need to forecast and manage their cash proactively and prevent idle cash balances from occurring in the first place! What is Idle Cash? Idle cash refers to money held by a company that isn’t being actively used for business operations, investments, or other productive purposes. While maintaining some level of cash reserves is prudent for liquidity and unforeseen circumstances, excessive idle cash can represent a missed opportunity and become a drain on company resources. Causes of Idle Cash Several factors can lead to the accumulation of idle cash: The Risks of Idle Cash While having cash on hand might seem like a good thing, excessive idle cash can pose several risks to your business: Deep Dive into Trapped Cash Trapped cash specifically can be a headache for treasurers, the time spent completing paperwork to ‘release’ the cash. Trapped cash refers to cash and liquid investments held by foreign subsidiaries that cannot be easily repatriated to the parent company due to tax implications, regulatory restrictions, or other factors. Countries Where Cash is Often Trapped While the specifics can vary based on a company’s global footprint and the nature of its operations, some countries are notorious for making it difficult to move cash out: Risks of Trapped Cash Having large amounts of trapped cash can pose several risks: Strategies for Managing Idle and Trapped Cash Given these risks, what can you do to manage idle cash more effectively? Also Read Join our Treasury Community Treasury Masterminds is a community of professionals working in treasury management or those interested in learning more about various topics related to treasury management, including cash management, foreign exchange management, and payments. To register and connect with Treasury professionals, click [HERE] or fill out the form below. Notice: JavaScript is required for this content.
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APIs vs. Open Banking: What’s the Difference?
This article is written by Palm APIs and OpenBanking are two commonly used terms in today’s treasury world; however, a stark number of professionals do not fully understand what they are and how they can harness their firepower effectively. This blog post aims to clarify what these tools are, how they function, and the potential benefits and challenges they bring to the table. Understanding APIs and Open Banking What is an API? An Application Programming Interface, or API, is a set of rules and protocols that allow different software applications to communicate with each other. APIs act as intermediaries, enabling programs to “talk” to one another without exposing the underlying code. In the treasury world , APIs facilitate access to bank services, data retrieval, and integration with third-party applications. Systems like Palm which integrate with your banks, ERP and other TMS, utilise APIs to create quick and secure connections to surface your data in one dynamic dashboard. What is Open Banking? Open Banking, on the other hand, enables companies to access financial data with the consent of the customer. Common examples of its usage are during in-app purchases if you are directed to your own banking app to create a payment, or if you apply for a loan and chose to share your financial history with the lender. In short, Open Banking is a regulatory framework that mandates banks to open up their customer data to third-party providers, with customer consent. The goal is to foster innovation and competition in financial services, leading to enhanced products and services for consumers. Open Banking relies heavily on APIs to securely share financial data, allowing third-party developers to create new financial applications and services. The Intersection of APIs and Open Banking While APIs are the technological foundation that makes data sharing possible, Open Banking is the policy-driven approach that governs how this sharing occurs. Together, they create an ecosystem where financial data flows more freely, enabling better customer service and increased transparency. How Data is Shared via APIs and Open Banking Data Sharing through APIs APIs facilitate data sharing by creating a secure connection between different systems. When a user grants permission, an API call is made to retrieve specific information from a server. This process ensures that data is shared efficiently and securely, without compromising the integrity of the original systems. Open Banking’s Role in Data Accessibility Open Banking leverages APIs to provide a standardised way to access financial data. It ensures that this data exchange is secure, transparent, and under your control. Security and Transparency There is no need to worry about confidentiality and security risk, both APIs and Open Banking prioritise security and transparency. APIs use encryption and authentication to protect data during transmission, while Open Banking regulations require strict compliance with data protection standards. User Experience with APIs vs Open Banking APIs and User Experience APIs enhance user experience by enabling seamless integration between different services and platforms. Using Palm, bank statements and transactions are updated automatically and seamlessly. This allows you to perform complex cash management tasks with just a few clicks. APIs simplify processes, making them more intuitive and user-friendly by embedding functionality of other services in one easy to use system. Open Banking’s Impact on Consumers Open Banking transforms the user experience by providing you more control over financial data. It allows users to compare products, manage finances, and access tailored services, all from a single interface. This transparency and accessibility empower consumers to make informed financial decisions. How Palm Uses APIs to Connect to Bank Accounts Palm’s Strategic Use of APIs Palm leverages APIs to provide seamless connectivity between bank accounts and its treasury management system. This integration enables real-time data access, enhancing decision-making and operational efficiency for large corporations. Enhancing Financial Management By using APIs, Palm offers comprehensive financial insights and analytics. This capability allows businesses to monitor cash flow, manage transactions, and optimise financial strategies, all through a single interface. Continuous Improvement Palm continually refines its API capabilities to meet the evolving needs of treasurers. By staying at the forefront of API technology, Palm ensures that its platform remains robust, secure, and user-friendly, providing unmatched value to its users. Conclusion APIs and Open Banking are reshaping the treasury data world. To explore how you can utilise this technology to streamline your treasury, book a demo with today. Also Read Join our Treasury Community Treasury Masterminds is a community of professionals working in treasury management or those interested in learning more about various topics related to treasury management, including cash management, foreign exchange management, and payments. To register and connect with Treasury professionals, click [HERE] or fill out the form below. Notice: JavaScript is required for this content.
Where companies fall short with cash forecasting, and how to avoid those pitfalls
This article is written by Palm Cash forecasting often takes centre stage in board meetings, strategic business discussions, and auditor reports. Having a reliable cash flow forecast model can steer the course of a business. Conversely, a neglected model can sit in a folder, unused, leaving CFOs and treasurers feeling blind and unable to make key strategic decisions. Whether you opt for a decentralised model that collects inputs from subsidiaries or have the treasury team forecast for the entire business, the level of human intervention is key in determining the efficiency and accuracy of your forecasts. This blog explores common pitfalls in cash forecasting and offers solutions to enhance your forecasting accuracy with Palm’s predicative modelling capabilities and AI toolbox. Over-reliance on External Inputs Many companies depend heavily on inputs from subsidiaries or other entities. Unfortunately, contributors often lack consistency, motivation, or the capacity to prepare accurate forecasts, making this a considerable challenge. When various subsidiaries apply different forecasting methods, it leads to inconsistency. This inconsistency can distort the overall cash flow picture, making it hard to trust the forecast. Contributors may not fully understand the importance of their input or may not have the time to dedicate to accurate forecasting. This lack of engagement can result in half-hearted efforts that compromise the quality of the data. Without proper training, employees might not be equipped to provide reliable forecasts. This knowledge gap can lead to errors that cumulatively affect the entire cash flow model. The Challenge of Combining Data Combining data from various sources can be a painful and time-consuming process. Even with standardised formats, variations in how regions classify entries and inconsistencies month-on-month can occur. Time-consuming Data Combination Merging data from different sources requires significant time and effort. This process can delay the finalisation of forecasts, making them less useful for timely decision-making. Variations in Data Entry Despite using standardised formats, regions may still classify entries differently. These variations can create discrepancies that need to be reconciled, adding another layer of complexity. Inconsistencies Over Time Month-on-month inconsistencies can arise due to changes in classification or data entry mistakes. These inconsistencies can make it difficult to compare forecasts over time, reducing their reliability. The Difficulty of Assessing Submissions for Errors Assessing submissions for erroneous figures can be challenging without in-depth local knowledge. This difficulty can lead to overlooked errors that compromise the entire forecast. However, even small errors can snowball, without providing quality feedback to those preparing the entries. Currency Challenges in Forecasting Currency challenges often arise when forecasts are prepared in local currencies. While this approach provides detailed insights, converting these forecasts into the reporting currency can be complex. Converting local currency forecasts into the reporting currency can be challenging. Using spot rates or budget rates can distort the numbers. If using a hedge rate or a forward rate, this could increase the accuracy of the long-term forecast specifically. Enhancing Cash Forecasting with Palm Palm provides a solution that addresses these common pitfalls. By consuming and analysing historical data, Palm’s AI and predictive models can generate a reliable cash flow forecast you can start using in days. Automated Data Collection Palm automates data collection from your bank statements, and TMS via API connectivity, reducing the time and effort required for manual data collection. This automation ensures that your forecasts are based on the most up-to-date information. Then, utilising AI and predictive to identify patterns and trends that are not obvious to the human brain. This gives you confidence in your forecast and numbers, by verifying your assumptions and seeing them brought to life through the cash forecast. In Palm forecasts refresh daily with all the latest information available, ensuring that your numbers remain current and reliable. Adding Human Insights to AI Models While Palm’s AI models provide a solid foundation, your insight and knowledge give Palm valuable information to help refine the forecasts in the future. Palm employs machine learning technology to take your understanding, apply it to the forecast and enhance accuracy over time based on the adjustments you make. As you feed more data into the model, it learns about your business, this continuous learning, makes Palm’s models more accurate the more of your gut instinct you share in the platform. Reducing Time Spent Updating the Forecasting Palm reduces the time spent creating, collecting, and consolidating forecasts. This reduction allows you to focus on important tasks like variance analysis. Focus on Variance Analysis Palm’s variance analysis feature highlights notable areas, helping you focus on differences where you can have the largest impact on forecast accuracy. This focus ensures that you are making the most of your efforts. By completing regular variance reviews, you can continuously improve your forecasts and iron out those deviations. Improving Cash Management for Treasurers Having a cash forecast you can rely upon allows treasurers to run tighter cash management programmes and optimise interest income or reduce debt drawings to ensure that you can make the most of your available cash. Reduce buffers held in bank accounts, and use that idle cash to generate positive cash flow into the business. Taking the Next Step with Palm If you’re interested in learning more about Palm, book a demo with the team today and see how the model works using your data. This opportunity allows you to experience the benefits of Palm firsthand and understand how it can transform your cash forecasting process. Also Read Join our Treasury Community Treasury Masterminds is a community of professionals working in treasury management or those interested in learning more about various topics related to treasury management, including cash management, foreign exchange management, and payments. To register and connect with Treasury professionals, click [HERE] or fill out the form below. Notice: JavaScript is required for this content.
Variance Analysis: A Treasurer’s Guide to Improving the Cash Forecast
This article is written by Palm A cash flow forecast without variance analysis is like an employee operating without any feedback. Their opportunity to learn, grow, improve and iterate is forgone and they are blind to how well they are performing. Despite this, many treasurers choose not to expend their scarce resources running a regular and comprehensive variance analysis. Is it because they struggle to step off the metaphorical treadmill, which involves constantly updating and managing the cash forecast, without leaving time to look back over past performance? Or is it simply, that they don’t have the insight into the variances, and the visibility to be able to understand and take action to correct differences? TreasuryWhatever the reason may be, in this blog post we’ll explore its importance, discuss why businesses often miss out on its benefits, and introduce Palm, a tool that revolutionises variance analysis, giving it life and making daily variance analysis a valuable tool in the treasury toolkit. What is Variance Analysis? Variance analysis is a powerful financial analysis tool used to measure the difference between forecasted and actual financial performance. It involves both quantitative and qualitative assessments to provide a comprehensive understanding of financial discrepancies. Quantitative analysis focuses on the numerical differences, while qualitative analysis provides explanations and reasons behind these variances. Calculated as: For incoming amounts: Actual cash flow – Forecasted cash flow For outgoing amounts: Forecasted cash flow – Actual cash flow This ensures the variance is identified correctly as either positive or negative. If the forecasted income is lower than expected, this is a negative variance, whereas if forecasted costs are lower than expected, then this is a positive variance. By identifying and analysing these differences, we as treasurers can pinpoint areas for improvement, make adjustments, and enhance the effectiveness of the forecast. However, not all variances are created equally. A 100% variance in a small bank account or category may have little impact on the overall forecast, whereas a 5% deviation in the largest bank account could deem the forecast as unreliable. Therefore when doing this process, it is key to focus on correcting the differences that will have the largest impact. Why is Variance Analysis Important? The significance of variance analysis cannot be overstated. However, we find larger corporations often overlook variance analysis due to the complexity involved in preparing the forecast and having detailed knowledge of the underlying positions to take corrective action. And in doing so, are missing out on these key benefits: 1. Enhances Financial Accuracy Regular variance analysis ensures that financial forecasts are accurate and reliable. By comparing actual results with forecasts, businesses can identify deviations and adjust future predictions accordingly. This leads to more precise budgeting and financial planning. 2. Identifies Changes in the Business As much as treasurers try to stay in the loop, there can be situations when the treasurer is unaware of a significant change which impacts the cash forecast and until variance analysis is conducted, they do not understand the impact. A timely variance analysis can bridge these gaps and improve overall efficiency. 3. Facilitates Strategic Decision-Making Variance analysis provides valuable insights that inform strategic decision-making. Understanding the reasons behind financial variances can prevent such instances from occurring again in the future. Introducing Palm: Revolutionising Variance Analysis Palm has dedicated much time and energy to creating a variance analysis tool, designed to cut through the noise and direct your attention to areas where you can add the most value. Streamlined Focus When using Palm each day and working with your cash management and positioning, your attention will be directed to the Notable Activities section of the cash flow dashboard. This is where Palm highlights Palm highlights the variances you need to investigate. This targeted approach allows for quick identification and resolution of financial discrepancies. Easy Investigations Investigating variances has never been easier. With Palm, you can drill down from the cash flow into individual transactions and corresponding bank statements. This seamless integration simplifies the investigation process, enabling you to quickly identify the root cause of variances and take corrective action. Continuous Improvement Palm’s learning capabilities ensure continuous improvement of your forecasts. By feeding back insights from variance analysis into the predictive models, Palm helps train these models to become more accurate over time. This means you can transfer your knowledge and expertise into Palm, allowing it to benefit your team and future members too. Real-Time Variance Analysis for Proactive Decisions One of the key advantages of Palm is its ability to integrate variance analysis into the daily operations of the treasury team. Instead of being a retrospective process, variance analysis becomes an ongoing activity, providing real-time insights that drive proactive decision-making. Staying Ahead of Issues With real-time variance analysis, you can identify and address issues as they arise, rather than waiting until the end of the month. This proactive approach ensures that potential problems are resolved quickly, minimising their impact on the business. Improving Forecast Accuracy By continuously iterating and updating forecasts based on real-time variance analysis, Palm helps improve the accuracy of your financial predictions. This leads to more reliable forecasting and financial planning, enhancing overall financial performance. Empowering Your Team Palm’s intuitive interface and advanced features empower your team to take ownership of variance analysis. By making this critical process more accessible and manageable, Palm helps your team become more efficient and effective in their roles. The Palm Advantage Variance analysis is one of the many tools available in Palm that differentiates the system from incumbent providers. A platform designed by treasurers for treasurers, it is a joy to use, and can add value from day 1. Here are some of the key benefits of using Palm in your treasury: Advanced Predictive Models Palm’s predictive models, generate a cash flow forecast using your data, which continuously improves over time learning your business and your business insights. As you investigate and correct your variances, we replicate these changes in the future, if you want us to. User-Friendly Interface Palm’s user-friendly…
Data-driven Treasuries are the Future and Here’s Why
This article is written by Palm Unleashing the Power of Data in Treasury Management The skills required to be successful in treasury are changing, and more and more treasurers seek to hire candidates who are proficient in data management. As data becomes a critical asset of all businesses, this too is reshaping how treasurers and CFOs design their functions. This blog will explore how data-driven treasuries are not just a trend, but the future of corporate finance. We’ll discuss the evolving role of key financial players, and offer practical insights to help your treasury stay ahead of the curve. The Rising Importance of Data in Treasury Management Data is often referred to as the new oil—a resource that fuels decision-making and strategy in modern businesses. In treasury management, data’s role is no less significant. It enables treasurers to gain insights into cash flow, liquidity, and risk management. In an era where precision and speed are crucial, treasurers need access to accurate and timely data to make informed decisions. This reliance on data not only improves operational efficiency but also enhances strategic planning. Gone are the days when cash flow forecasts were collected in spreadsheets. Now, Treasurers are utilising data and statistical models in Palm to develop their cash forecasting solutions. The traditional treasury functions focused on only a few core tasks such as cash management and financial risk management are rare. Today treasurers are expected to do much more. They need to anticipate cash shortfalls, optimise working capital, and ensure compliance with evolving regulations. Data provides the necessary insights to meet these demands effectively. By harnessing the power of data, treasurers can create predictive models that forecast future trends and prepare for uncertainties. The integration of data into treasury management processes allows for real-time monitoring and analysis. Palm uses API technology to connect to your banks, ERP and TMS so all data is centralised in one place. Allowing your treasury to become proactive rather than reactive. The Evolving Role of Treasurers and CFOs with Data As the landscape of corporate finance evolves, so too does the role of treasurers and CFOs. These key players are increasingly becoming strategic partners within their organisations, using data to drive critical business decisions. The days when financial leaders only focused on balance sheets and income statements are long gone. Today, they are expected to be data-savvy leaders who understand the broader economic context and its impact on their organisations. Treasurers and CFOs are using Palm to leverage data to break down silos across departments, fostering a more collaborative environment. By sharing insights from treasury data, they can provide valuable input into sales forecasts, marketing budgets, and operational plans. This holistic approach ensures alignment between financial goals and overall business objectives. Data-driven decision-making empowers treasurers to optimise their organisations’ capital structures. They can assess various funding sources, analyse interest rate trends, and evaluate currency risks to make informed choices. By incorporating data analytics into capital allocation decisions, treasurers can enhance returns on investments and reduce borrowing costs. This strategic use of data ultimately strengthens the organisation’s financial position. AI and Data Management Palm utilises artificial intelligence (AI) and machine learning algorithms to offer powerful tools for data analysis. By analysing historical data and identifying patterns, AI can generate accurate forecasts and identify emerging trends unknown to a human brain. This capability empowers treasurers to make data-driven decisions with the support of emerging technology. Furthermore, AI-driven automation streamlines repetitive tasks, freeing up valuable time for treasury teams to focus on strategic initiatives. Practical Tips for Implementing a Data-driven Strategy Implementing a data-driven strategy in treasury management requires careful planning and execution. Here are some practical tips to help your organisation get started: Define Clear Objectives: Begin by identifying the key objectives you want to achieve with data-driven treasury management. Whether it’s optimising cash flow, improving risk management, or enhancing decision-making, having clear goals will guide your strategy. Invest in the Right Technology: Evaluate different technology solutions available in the market and choose those that align with your organisation’s needs. Look for platforms like Palm’s that offer robust data analytics capabilities, integration with existing systems, and scalability for future growth. Build a Data-driven Culture: Foster a culture of data-driven decision-making within your organisation. Encourage collaboration between departments and provide training programs to enhance data literacy among employees. By empowering your team with the skills to analyse and interpret data, you can unlock its full potential. Data-driven Treasuries are the Future Data-driven treasuries represent the future of corporate finance. Treasurers and CFOs who embrace this paradigm shift will gain a competitive edge, positioning their organisations for success in an increasingly complex business environment. By leveraging data, these financial leaders can optimise operations, improve risk management, and drive strategic decision-making. Remember, data is not just a tool—it’s a strategic asset that holds the key to accurate cash forecasts, better cash positioning, better decision making and ultimately business success. Also Read Join our Treasury Community Treasury Masterminds is a community of professionals working in treasury management or those interested in learning more about various topics related to treasury management, including cash management, foreign exchange management, and payments. To register and connect with Treasury professionals, click [HERE] or fill out the form below.