Cash management in a world in flux

November 22, 2022

With the outbreak of COVID-19 in March of 2020, the world seemed to come to a halt. In hindsight, this was quite the opposite, as it turned out to be the accelerator for a world in motion. The functioning of a production system that relies on the assembling of products with components coming from different parts of the world could no longer be taken for granted. With the stringent lockdowns in China, it became clear that complex supply chains are vulnerable. The trend of continuing globalisation was paused and entrepreneurs were looking for solutions to these new problems.

Undeniably, putting the global economy on halt has proven to be easier than rebooting it. Delivery times are rapidly extending, while availability of components no longer exists. In addition, the reopening of economy requires more energy and labour than there is supply. The outcomes: rising inflation and volatile exchange rates. For the cash management of international companies, this presents major challenges. When do you pay when delivery is not certain? How do you approve invoices when your staff is working from home? And how does the current inflation impact credit management?

ngan hansen

Ngan Nguyen, Head of Cash Management at BNP Paribas explains that the turbulent environment is accelerating the adaptation of smart fintech solutions. “Due to unexpected price increases, it occurs that certain customers or customer groups are falling behind on payments. In these instances, it would help tremendously to spot cost increases early on. Volatility makes forecasting more complicated but also more important. The right application gives companies insight into their future cash position, so that decisions on larger expenditures can be timed properly. This is exactly when the importance of an agile financial ecosystem becomes apparent.”

BNP Paribas is strengthening its services with smart solutions from innovative fintech companies. A good example is Cashforce. Connected to most Treasury Management and ERP systems worldwide, this application allows treasuries to estimate their future cash position based on expected payments and receivables.

“The application gives companies a good indication of their future financial health and helps them make timely decisions for the future. For instance, a negative cash flow will raise the question of how to optimise working capital, while a positive cash flow will require looking at how best to spend excess cash,” Nguyen says.

Besides working closely with innovative companies, BNP Paribas underlines the importance of technological development in the sector with an annual IT budget of more than EUR 6 billion. Within cash management, major investments include improving the customer journey during onboarding and the piloting of the Welcome digital platform. This greatly simplifies various processes, such as collecting KYC documents and opening an account digitally. “Next steps include digital signing of contractual agreements, such as cash pooling documents,” Nguyen said.