Musings on My Cash Flow Blues

Musings on my cashflow blues

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Being a finance professional, my training and instinct are in sync that the one true metric to measure your control efficiencies is the cash flow. Donning the hat of finance head for 3 high growth start-ups over the last 7 years, life has taught me though that getting a tight grip on the real cash flow is hard to achieve.

Starting as a single person finance team when the transactions could be counted on the fingers later adding junior resources to help record and handle compliances, as the businesses scaled in volume and complexity (which thankfully all of them did), the finance function started growing too; it is expected, no doubt.

Accountants, compliance guys, supervisors, controllers, business finance resources, thus goes the list of the key skillsets needed. Recruitment starts, great efforts go in to build that perfect team, much alike the first few weeks of any new year where resolutions are taken with utmost seriousness and worked upon; you close a few key positions and you dream of the day when they will collectively report the critical numbers and you just have to take high quality informed decisions to take the business to the next level. Let’s have a look at the reality post the teams are all in place.

Month 1: Most of the reports are messed up; book closure takes forever; bank statement has no connection whatsoever to the business that was done neither to the accounts maintained in Tally/QuickBooks or any other software you chose to use.

Month 2: On the day 5 you realise that you really need to put a review mechanism in place. Announcement is done and the review happens. Controller states the difficulty of identifying invoice numbers to collection and the need of 2 more reconciliation resources as the existing team is unable to make any sense despite regular efforts and weekend work leading to many unhappy family faces; compliance complaints of book closure and accounting timelines making it too difficult to calculate taxes on time, subsequently to remit on time and thus to meet the compliance timelines.

Accountant complains of bills not submitted on time while being questioned about the delay in rent and electricity payment leading to a few dark hours without power in office. Altogether dream team is struggling and you sense that something has to be done for them, you step in too; remember you still need to see the day where you just have to make decisions and nothing else on data front.

Day 10: You think very hard about the problem, identifies the following root causes. Issue no. 1 ; the database that records revenue does not talk to any of the collection channels; Invoices are based on the database; collections are made through payment gateway, bank transfers, wallet etc etc.

At least 10 different logins and platforms through which money flows and the only place to verify remains your primary place where all business transactions are recorded, yet another system. Money flows into a third system, the bank. None of these systems had a common language and the numbers never tallies unless all three systems are connected seamlessly; Eureka moment; solution is simple, you have a rockstar tech team you know that and you propose the next day that we need to help the finance team with some automation help.

The ever-stretched tech bandwidth suddenly goes through future planning and trade offs and you finally jointly conclude that it is currently not possible to commit this precious resource on non- product side. You are left with only one option, put people at this problem, to connect the database to the accounting software and in turn to the bank flow and back, till a fully automated solution is arrived at.

Day 15: You decide to build the army of reconciliations team; the team that makes all the 3 systems talk to each other. Thus the database looks a lot like the books which slowly starts reflecting the real bank balances, barring a few unidentified “reconciling items” that could pop up in any leg of the reconciliation. Sigh, at least some information is readily available which you could say has 60% accuracy and you decide to live with the unknown 40% that could if luck permits, limit your risk to within your margin losses. Decision was made too, with the tolerance limit of losses; and this decision mostly is there to stay, and the team to grow as we scale.

However, walking in every day to the finance department with a burgeoning reconciliations teams, brought terrible blues, the gloom of not being able to get the right grip on the real cash flow. Processes, reviews, presenting the business case in the core committees to get the precious and limited tech bandwidth for automation, discussions with banks on innovative solutions (literally most of the major ones) and evaluating umpteen ready made and customisable solutions to tackle the reconciliation and receivables issue, I came to the conclusion that it still remains a CFO’s dream to have a one-stop affordable solution to manage cash flow effectively.

You might be wondering why I narrated this story; This is how I embarked on my entrepreneurial journey; a journey that stemmed from my OCD issue in financial discipline and hygiene, and the reconciliation blues. I wanted to know the exact position of cash flow, whether I received all that I had to? Whether I receive cash on time? Who has to pay me and what patterns each ones show in settlement? How much working capital should I plan for? When and how much is my expected promised payouts? Is there any revenue leakage due to short collections? What are the components of my working capital? Answers remained uncertain, never with a 100% accuracy making me more and more restless even with broad control mechanisms in place.

We started working on a solution that could help identify all of these by the click of a button; a tech layer that joins internal systems such as transaction database, accounting system (ERP included) to bank statement. Each vendor and a customer has a unique identity that the platform pushes into all the related systems, making them all connect seamlessly. Once the cash flow is under control, decisions and solutions are easier to make. In the order of priority tackle the items that negatively impacts cash inflow first; work on high impact solutions. Find an easy way to predict and bridge working capital requirement. Also put in place a mechanism to earn the best returns on excess cash flow.

Thus the neobanking platform Open was born, out of a passion to work with various businesses at different stages, who are suffering from the same blues as I had. Business banking is broken, to a good extend due to the complexity of the money flow channels and touch points. We stitch them together, provide features and services to manage the cash cycle and the cash flow. In a way, one platform to manage all your business finances – where you can record, track, manage and understand your cash movements, be it inflow or outflow, and make informed business decisions. We hope to make a positive impact in the way we follow the money flow, the dream of many an entrepreneur and finance professionals the custodians of cash.

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