Financial Ecosystems and the Future of Cash Flow Visibility

Aberdeen Group released a new whitepaper entitled “Beyond Payables: The Evolution of the Modern Financial Ecosystem” in which authors Chris Dwyer and Ankita Tyagi define “financial ecosystem” as a combination of accounts payable, accounts receivable, trade finance, and global payment management. Once considered “the costs of doing business,” the authors redefine these departments as a strategic tool of value.

The survey conducted as research for this whitepaper concluded that 78% of respondents believe one of the top priorities for the financial ecosystem as a unit is to improve visibility into cash flow and cash management. Dwyer and Tyagi indicate that there is an interconnected reliance between financial functions and the failure to manage these “traditional workflows,” reducing executive insight into cash flow.

According to the Beyond Payables research study, less than half (45%) of organizations are currently managing their financial ecosystem in a centralized manner. However, the study indicated that over 70% of companies expect to centrally-manage their A/P, A/R, trade finance/trade partner management and global payment management departments in the future.

“This finding proves that financial executives, realizing how these processes are already inherently-linked via complex workflows, are prepared to encompass these attributes under a centrally-managed program/division to improve operational performance and achieve a much-heralded state of extraordinary cash flow visibility.”

The second half of the Beyond Payables survey split respondents into two groups, “leaders” and “followers” based on aggregate performance scores. Over 50% of leaders indicated financial ecosystem capabilities to include standardized payment processes, visibility into all stages of electronic payment processes, documented processes for payments shared internally and externally, and cross-functional coordination of payments between procurement, finance, treasury, and IT. Less than 50% of the follower group indicated capabilities in these areas. It was also reported that CFOs in leading organizations were 72% more likely than those in following companies to hold a large portion of responsibility for cash flow analysis.

The key takeaways from Aberdeen’s Beyond Payables whitepaper include:

• Place emphasis on how aspects of the modern financial ecosystem are linked and managed as a means of pinpointing gaps and opportunities for improvement.
• Support management of this ecosystem with specific enablers, such as payment factories, full A/P automation, and trade financing tools
• Put the power of liquidity and cash flow analysis in the hands of the CFO
• Maintain a strategic outlook for managing the financial ecosystem

 Read the entire whitepaper, available for free on Aberdeen’s website.