Improving Cash Flow During Challenging Times
Here’s how to increase your working capital during times of uncertainty with automated vendor management.
While the added stress of managing the impact of uncertain and dynamic times has hit all leaders and functions hard, the hardest hit have been chief financial officers (CFOs) and the finance departments they are leading. With companies predicting a significant loss of revenue and profits, finance functions are being challenged to pull all the levers they can to minimize the financial damage.
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Addressing Finance Challenges
In challenging times, the age-old saying “cash is king” has never been truer. For CFOs, ensuring their companies’ working capital management strategies and processes are top-notch is once again a vital priority. After all, tighter working capital performance means it’s imperative to carefully time inflows and outflows of cash, especially for companies operating on a small cushion of safety.
Heading into the pandemic-induced recession, though, working capital was not as optimized for many companies as it could have been. Needlessly tying up capital in receivables, payables, and inventory has made this crisis very challenging for many organizations. This year could be very challenging on the working capital front for quite some time, as customers delay remitting invoices and suppliers and vendors fight to get paid. But there’s a silver lining — there’s room to raise cash levels and better manage cash flows simply by improving process management.
In 2019, historically low interest rates made it easy to finance operations if cash didn’t flow smoothly. Metrics like the cash conversion cycle (days sales outstanding plus days inventory outstanding minus days payable outstanding) generally became less important. Fast-forward to mid-2020, the COVID-19 global pandemic and the resulting economic fallout have raised the importance of process standardization and optimization.
Now more than ever, it’s critical to automate your accounts payable process and workflow.
Automating Accounts Payable
To fully automate AP processes and workflows, companies must start with their onboarding process when engaging 1099 workers and vendors. A critical component is collecting W-9 forms which are essential for filing 1099 forms. Within Liquid’s onboarding process, W-9s are automatically collected for every 1099 vendor. Additionally, all required details for processing payments to the vendor are also collected during onboarding.
Liquid also helps to streamline and automate invoice processing workflows. Invoice approvers and approval policies for your company can be set in Liquid, and the approval notification workflow is automated. These policies can be further customized with specific rules for invoices that exceed specified dollar amounts.
Saving Time and Money
Managing payments for 1099 workers is often a pain point for accounting departments, requiring hours of effort each month to validate, approve, and authorize payments. Additionally, the probability of errors, late payments, or duplicate payments can increase.
CEO Jenny Gao of Fly by Jing shared that “Liquid saves me lots of time – every month that’s dozens of hours more I spend growing Fly By Jing.” Now her company is able to both quickly onboard new contracts and easily manage payments. Similarly, CEO Lori Shao of Finli is also saving money and hours every month by using Liquid.
With Liquid, the finance team has full visibility to spending on 1099 workers, improving the accuracy of financial forecasting and the ability to effectively manage cash flow.
Switching to Liquid
After years of managing manual accounts payable workflows and processes, moving to a digital vendor payment solution with automated workflows will be a breeze. Switch to Liquid and request a demo to set up and automate your accounts payable processes today!
Ready to automate your accounts payable process and workflow to increase your available working capital? Sign-up for Liquid beta today.
Note, we are not providing legal, tax or payroll advice. Please consult your legal, tax and payroll professionals. These are simply to serve as guidelines based on our own experiences.
Updated: September 15, 2020
Quick note: This is not to be taken as tax advice or legal advice or payroll advice. Since tax rules and laws change over time and can vary by location and industry, consult a CPA / tax advisor and/or attorney for specific guidance.