Growth plans at risk due to lack of cash flow visibility: Visa study

02/26/2015

Research commissioned by Visa shows leading Australian corporations lack a long term view into cash flow, hampering their ability to make business critical decisions

Sydney - New research released by Visa today shows that more than 70 per cent of leading corporations in Australia do not have the capability to forecast their cash flow 60 days ahead. This is despite most organisations clearly identifying cash flow as the single most important determinant of business profitability.

Ian Boyd, Head of ‎Commercial Payment Solutions, Visa in Australia said, “Cash flow visibility is key to the judicious management of liquidity and risk by corporates. For CFOs and treasurers this visibility allows them to make accurate decisions on reinvestments or expansion of their businesses, to ensure long-term growth and profitability.

“The fact is there is an opportunity for Australian corporates to adopt business-to-business (B2B) payment systems that are more digitised,” Boyd continued. “Australia is leading the way in many digital payment areas but it is clear Australian corporates could benefit from improved processes.”

The Visa Cash Flow Visibility Index study (the “study”) surveyed CFOs and corporate treasurers of leading companies from ten countries/regions across the world including Australia. The study found that while Australia leads the way in the uptake of digital payment systems, local corporations lack real-time visibility and predictability of their cash situation because they don’t have appropriate cash management processes, systems or tools in place.

Key findings from the study show that:
• While 85 per cent of payables by leading corporates in Australia are managed on a payables platform , only one quarter of collections are managed on a collections platform.

• More than 70 per cent of corporates do not have the capability to forecast their cash flow 60 days ahead and just under 35 per cent of them do not have a 30-day visibility

• In the region, 81 per cent of the companies do not have 60-day cash flow visibility and 50 per cent of them do not have 30-day visibility. Given the lack of the right processes, systems and tools, these companies require time to manually work on and generate cash flow and analysis reports. Hence, these reports may be at least 10 days old.

Another key finding from the study showed that organisations in the region spend up to 253 hours per week manually entering data and preparing cash assessment and analysis reports because of the lack of appropriate tools and systems. Australian companies fare better, but still require more than 116 hours a week to perform these tasks.

The study also highlighted the low adoption of electronic collection and payable platforms in many businesses. Some 76 per cent of companies in Australia use electronic collections platforms to manage their revenue but only 25 per cent of revenues are managed electronically by a collection platform. The lack of real-time digitised data of receivables and payables means that businesses are unable to predict their future cash obligations accurately.

Key Findings from Visa Cash Flow Visibility Index
	Australia	Region
Do not have 60 Day cash visibility	71%	81%
Do not have 30 Day cash visibility	34%	50%
Hours spent manually analysing and assessing data	116	253
Do not have up-to-date cash flow analytics reports that provide real-time cash visibility	85%	92%
Use of electronic collection platforms	76% (of corporates)	50% (of corporates)

Countries in the region comprise of six countries/regions namely Australia, Hong Kong, India, Japan, Malaysia and Singapore

CEO of East & Partners Asia, Lachlan Colquhoun, who conducted the study for Visa highlighted, ”Large and complex organisations that have enterprise systems appear to have an overlap between data maintained on their systems and on spreadsheets. This overlap indicates that duplication of data persists or that the same duplicated information is inadequate for eventual use. We also see companies in sophisticated markets such as Australia that have a higher proportion of data available on their enterprise systems having a higher degree of overlap.”

“Our discussions with finance professionals suggest that their challenges in obtaining accurate data may arise from a lack of optimisation on existing systems. Finance professionals also hesitate to source new solutions due to the perceived time and resource investment that they believe is required. However, easy-to-deploy and cost effective solutions are available to companies, and they can start by changing the way businesses pay and get paid. A 16-digit account plays a pivotal role in this process change,” Boyd added.

Visa has a significant focus on digitisation of B2B payments. In collaboration with established global technology solutions providers such as cloudBuy, Kofax, Invapay and Spendvision, Visa is able to give businesses a comprehensive and effective approach to managing their financial processes and address the challenges of visibility and predictability. For example, Invapay helps to facilitate buyer initiated electronic payments by onboarding suppliers.

About Visa
Visa Inc. (NYSE: V) is a global payments technology company that connects consumers, businesses, financial institutions, and governments in more than 200 countries and territories to fast, secure and reliable electronic payments. We operate one of the world's most advanced processing networks — VisaNet — that is capable of handling more than 56,000 transaction messages a second, with fraud protection for consumers and assured payment for merchants. Visa is not a bank and does not issue cards, extend credit or set rates and fees for consumers. Visa's innovations, however, enable its financial institution customers to offer consumers more choices: pay now with debit, pay ahead of time with prepaid or pay later with credit products. For more information visit www.visa.com.au and @VisaNewsAU.

Media Contacts:
Jillian Friant
Visa AP (Australia) Pty Ltd
[email protected]

Seamus Horan
Fuel Communications
[email protected]