Accounting
Poor cash flow can sink any business
Every business leader knows how critical revenue and profit are to a company’s long-term success. But there’s another factor that’s equally important to an organization’s day-to-day health: cash flow.
If a company runs out of money, it won’t be able to pay staff, pay for office space, pay vendors, pay interest, pay for inventory, or pay for anything. Money on hand is what keeps the lights on — literally.
That’s why managing cash flow is so important. The calculus is pretty simple: If an enterprise doesn’t accurately measure and manage cash flow effectively, it’s likely to suffer from business volatility and won’t be able to make sound financial decisions for the future. Furthermore, it may risk overtrading and ultimately going out of business. Sadly, too many companies go under not because they’re poorly managed or have a bad business model, but simply because they lack liquidity.
Managing cash flow is even trickier for organizations that sell services rather than just products. Accounting firms, consultancies and software companies typically offer a complex variety of billing arrangements that include fixed-price fees, time and materials, additional ad hoc charges, and milestone-based payments. In addition, many service companies have started to offer subscription-based services. These not only add greater complexity to invoicing, but also can make revenue recognition extremely complicated.
A single source of truth
Many companies still have to rely on siloed, disconnected processes to manage cash flow, making it much more difficult to forecast accurately. Such companies may use a CRM system for managing sales, a different system for managing service delivery, and an old legacy system for managing invoices and handling the accounts. These archaic systems will typically be supplemented by a collection of spreadsheets, resulting in a mess of disparate tools all detached from one another.
This disconnection causes confusion and process inefficiencies that inevitably lead to errors and delays. When there’s an inconsistency between what’s been sold and what’s been invoiced, customers won’t pay their dues — they’ll dispute their bills, they’ll hold off payment, and ask for discounts or even write-offs. In summary, if you give customers a reason not to pay their invoices, they won’t, especially in a tight economic environment, and this inevitably results in unacceptable levels of outstanding debt.
Companies require a common source of truth that is enterprise-wide. One that provides a shared source of data for accounting, operations, billing, sales and all the other divisions that impact service delivery. Rather than having to comb through spreadsheets and fumble through disparate tools to find financial and billing information, companies need a system that gives all employees access to the same information and data in a single place.
If there’s not a common, shared view across all teams, precise cash forecasting will be impossible. Discussions around the boardroom table risk descending into a debate about whose information is correct, rather than agreeing on what decisions the business needs to take.
Only when all of this accurate information is brought together can enterprises produce a truly precise cash flow forecast. Having a complete view of anticipated revenues, costs and incomes enables them to really understand their margin and to accurately predict cash flow for any given time. With these insights, organizations can make better near- and long-term decisions and avoid expenditures that could threaten their business.
Ideally, organizations should be able to extend this transparency to the customer with portals that offer users access to all the same information — such as payment history and invoice details. As a result, customers will be able to view their own transactions and resolve their own inquiries, minimizing the likelihood of delayed payments, and improving customer satisfaction as well.
AI can help, but it has to be pragmatic
As with many other areas of business, artificial intelligence offers significant potential in helping solve these problems, but it needs to be practical and target common, current business problems rather than aspirational or flashy use cases. It needs to be pragmatic in application, gathering, processing and presenting data to produce measurable outcomes and a tangible return on investment.
Here’s an example of how AI can support cash flow management: A services company relies on its clients to pay their bills on time to maintain steady cash flow and manage its operations. Using AI, the company is able to analyze past payment patterns, client behavior, economic indicators and other relevant data to accurately predict the propensity for any customer to pay a particular invoice.
For instance, the AI might establish that if a customer has been spoken to in the past week, that they are more likely to pay their bill on time. Or it may highlight that any invoice over $100,000 requires an extra layer of approval, which routinely causes delays.
The use of AI will enable enterprises to both generate more accurate cash flow forecasts for better business decisions and also to implement improvements in operating procedures and business practices that will improve the management of debt.
Cash is king, so manage it accordingly
The old saying still rings true today: Revenue is vanity, profit is sanity, cash is king. It doesn’t matter if a business is booming or if it’s struggling — bad cash flow management can sink any company. To stay on top of cash flow and guide themselves wisely, as a starting point organizations have to bring their accounting, operations, billing and sales workflows and data together in one place. In addition, smart use of AI allows enterprises to do more than just forecast correctly, enabling them to uncover new ways to boost cash flow entirely.
The Biden administration gave carmakers a partial reprieve in finalizing electric-vehicle tax credit rules intended to loosen China’s grip on battery materials crucial to the car industry’s future.
Starting in 2025, plug-in cars containing critical minerals from businesses controlled by U.S. geopolitical foes, including China, will be ineligible for up to $7,500 tax credits, the Treasury Department said Friday. Automakers will get an extra two years, however, to shore up sourcing of graphite and other materials considered difficult to trace to their origin.
The rules put finishing touches on President Joe Biden’s push to develop an alternative to China’s preeminent EV and battery supply chains. The administration is imposing stringent sourcing requirements for raw materials and components in order for electric cars to qualify for the tax credits that are a powerful draw for consumers otherwise put off by
“These actions provide a strong signal to automakers that we want to see EVs built here in America with components and critical minerals sourced from the U.S. and our allies and partners,” White House Climate adviser John Podesta said.
The two-year exemption speaks to the challenges automakers have had reducing their reliance on Chinese suppliers of materials such as
The Biden administration’s rules don’t allow tax breaks for vehicles with batteries containing critical minerals from foreign entities of concern, a term referring to businesses controlled by US geopolitical foes such as China, North Korea, Russia and Iran. Those requirements take effect in 2025, as proposed.
But Biden has given auto and battery manufacturers some flexibility on this front, too.
Automakers will now have until 2027 to curb the use of certain difficult-to-trace materials from FEOCs, provided that they submit plans to comply after the two-year transition and it’s approved by the government, the Treasury Department said.
“FEOC exemptions for any battery materials should be temporary,” said Abigail Hunter, the executive director of the Center for Critical Minerals Strategy at SAFE, a Washington think tank. “We need a clear exit strategy, lest we continue our dependencies on adversaries and further undermine the competitiveness of U.S. and allied critical minerals projects.”
The rules release concludes two years of work on requirements that already have reduced the number of EVs eligible for tax credits. About 20 models qualify today, compared to as many as 70 previously. Treasury Department officials said Friday they expect the number of qualifying vehicles to continue to fluctuate as companies adjust their supply chains.
Automakers including Tesla Inc., General Motors Co. and Toyota Motor Corp. have lobbied for additional flexibility to meet requirements. A lobby group representing automakers based outside the US praised the additional two years provided for the difficult-to-trace materials.
“It will take time for the global production and sourcing of graphite and other critical minerals needed to produce EVs to match the strict standards required by automakers,” Autos Drive America President Jennifer Safavian said in a statement.
Senate Finance Committee Chairman Ron Wyden, D-Oregon, demanded
The glitch,
“Fixing this error will require identifying all affected Oregonians, notifying them, and ensuring they can be made whole,” said the senator. “In part because of TurboTax’s various guarantees and market share, Oregonians who overpaid due to TurboTax’s error likely assumed the software opted them into claiming state standard deduction to minimize their taxes. That assumption was wrong. And because the vast majority of taxpayers understandably dread filing season and avoid thinking about taxes after it ends, many of those affected will not learn on their own that they overpaid. Intuit must act to inform them and help them get the full tax refunds they are entitled to receive.”
Tiffany Hagler-Geard/Bloomberg
An Intuit spokesperson said the company is currently working to resolve the issue, referencing their tax return lifetime guarantee.
“As part of our
The senator has also asked Intuit for an explanation of how this glitch happened in the first place, as well as an approximate timeline for the steps it took once it became aware of it. He has also asked for a count of precisely how many people were affected, as well as Intuit’s plans for both addressing this problem and what the company will do to prevent it in the future.
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