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Cash Flow Management

Cash flow is very important for all businesses. It simply refers to the movement of funds, including money coming in and money going out. Businesses generally track cash flow regularly to prepare reports. These reports are prepared over specific intervals, including daily, weekly, monthly, quarterly, or yearly. 

Managing cash flow is very important, as it provides a more comprehensive understanding of how the business is performing. 

What is Cash Flow Management?

Cash flow management simply refers to a series of steps businesses can take to track, optimize, and analyze the amount of money flowing through the business. 

Effective cash flow management allows a business to more accurately forecast the amount of money that will be available to them at certain times in its future. The primary purpose of cash flow management is to maintain a positive cash flow, thus keeping the company “in the green.” 

Positive cash simply means that the company is receiving more cash than the amount that’s going out of the company. For instance, when a debtor makes payment (reducing accounts receivable as a result), the company’s cash flow increases. 

Negative cash flow, on the other hand, is when more cash is going out of the business than the amount coming in. A company that’s recording negative cash flow over longer periods might be in trouble. However, it’s not always a bad thing. 

For instance, if a company pays off a significant balance of a vendor (reducing accounts receivable as a result), it might find itself with negative cash flow for a certain period of time. 

Generally, with effective cash flow management practices, including cash flow analysis, companies can maintain positive cash flow. 

Why Is Cash Flow Management Important?

Without cash, companies cannot function properly. Poor cash flow management practices can lead businesses “into the red,” when they’re spending more cash than bringing in. As a result, if a company cannot pay its bills over an extended period of time, it might go out of business. 

Without enough cash, a company may find itself unable to buy more inventory, pay its bills, release payroll, or achieve operational efficiency.

Effective Tips to Manage Cash Flows 

Procure-to-pay processes can also play an important role in cash flow management. For instance, companies that stock large amounts of inventory effectively tie up cash. 

If you order too much, there’s also a risk of unsold inventory, Or, if you buy too less, it could lead to disgruntled customers. It’s important to promote cross-department collaboration and use a procurement automation solution to improve inventory management, which directly impacts cash flows. 

1. Automate Invoice Processing

Invoice processing can cost companies a significant amount of money. However, instead of manually processing and approving each invoice, automating the invoice lifecycle process can save companies a significant amount of money. 

It simplifies invoice data capture, matching, and approvals, freeing up the AP teams to work on more important and meaningful tasks that further improve the company’s bottom line. 

2. Negotiate Discounts

One of the best ways to improve cash flow is to negotiate discounts with vendors. Early payment discounts can be negotiated with different vendors, allowing businesses to pay less if the amount is cleared before a specific date.

This is possible if manual inefficiencies are removed from the AP department, allowing businesses to save thousands, if not hundreds of thousands in the process. 


Managing cash flows is critically important for any business that wants to grow. Tracking the company’s spending and incoming cash can help companies make strategic moves and grow without having to worry too much about making payments. 

As shown above, cash flow management can be significantly improved with an optimized procure-to-pay process. SoftCo’s Procure-to-Pay software lets you automate your entire finance process, from procurement to invoice clearance and posting to the finance system. 

It’s fast, efficient, and gives you real-time reports and AI analytics. It also integrates seamlessly with existing ERPs, letting you track the effect on your cash flows and help you gain more insights about your procurement process.