Financial Execs Recognizing Inefficiency of Traditional Cash Management Processes

Visa survey finds use of corporate payment cards on the rise as efficient cash management tool

Visa survey finds use of corporate payment cards on the rise as efficient cash management tool

San Francisco  October 12, 2005  Only about half of financial executives and cash managers view their cash management process as efficient, with many citing the lack of streamlined operational processes and increases in labor-intensive administrative work as the cause of inefficiencies, according to a new survey from Visa USA.

In Visa's annual cash management survey, the results of which were released this week, just 58 percent of financial executives and cash managers described their cash management process as efficient, a marked decrease from the 2004 study, in which 70 percent of respondents said their cash management processes were efficient.

In responding to the survey, corporate cash management professionals noted plans to continue reducing their reliance on checks to make commercial payments over the next year, while similarly preferring corporate payment cards over checks when receiving commercial payments.

Overall, 56 percent said they planned to reduce use of checks (increase of five percentage points from 2004), while 50 percent said they plan to increase their use of corporate payment cards (increase of 10 percentage points). In addition, 76 percent expressed satisfaction with corporate payment cards for receiving payments, as opposed to 60 percent expressing satisfaction with checks.

"We continue to see a downward trend in corporate preference for check payments, as adoption and satisfaction of more efficient electronic payment methods, like corporate and purchasing cards, increases," said David Cramer, senior vice president of commercial solutions at Visa USA. "By 'electronifying' a greater share of their commercial payments, corporate America is realizing increased cash management process efficiencies with measurable cost saving benefits."

Growing Relevance of Corporate Payment Cards

Visa said that the survey of more than 400 financial and treasury executives from more than 20 industries provides an analysis of the effectiveness of today's corporate cash management processes.

In responding to the survey, financial executives indicated that corporate payment cards play an increasingly important role in the cash management process. While satisfaction with card-based payments has increased to 77 percent from 70 percent last year, their preference for other electronic payment options  such as automated clearing house (ACH) payments  appears to be declining. Respondents reporting use of ACH for commercial payments has significantly dropped 20 percentage points to 35 percent in 2005.
Corporate financial and treasury executives identified a number of key areas where corporate payment cards have helped improve the cash management process. Some of the areas with the largest increases include:

  • Providing new levels of data  +12 percentage points to 44 percent of respondents in the survey;

  • Giving more visibility into cash position  +12 percentage points to 36 percent;

  • Helping forecast future cash needs  +10 percentage points to 30 percent.
Respondents also noted the increased relevance of corporate payment cards in several steps of the cash management process: concentration of funds (up 13 percentage points), short term money management (up 10 percentage points), funds positioning and forecasting (up 9 percentage points), collection and application of funds (up 7 percentage points) and disbursement of funds (up 4 percentage points).

Additional Key Findings and Trends

A growing number of respondents (42 percent) said changes in technology, such as improvements in procurement automation or systems integration, have had a positive impact on improving their ability to more effectively manage cash flow, up sharply from 30 percent in 2004.

Even as technology improves the cash management process, nearly one-third of respondents (29 percent) said changes in corporate governance have constrained their activities, as more requirements are put in place relating to corporate visibility, systems of control and financial disclosures and reporting. Respondents expect changes in corporate governance to be the leading issue impacting the cash management process over the next 12-18 months.

"As financial executives and cash management professionals continue to increase their use of electronic payments, their efforts to adhere to corporate governance requirements should become easier," Cramer said. He added that Visa's ability to capture payment detail can provide enterprises with an increased level of visibility and control, while the company's commercial card best practices can help enterprises further streamline the procure-to-pay process."

The Visa Cash Management Survey was conducted by over 10 days in August and September 2005 and involved the responses of 410 financial executives and cash managers from across more than 20 industries. The majority of respondents (86 percent) had annual sales of more than $50 million per year, of which 44 percent represented more than $500 million per year. More information about the survey is available on request.

Additional Articles of Interest

 P-cards continue to advance, and e-payables solutions are making headway, but the convergence of the financial and physical supply chains is still a work in progress. Read more in "Enabling the Financial Supply and Demand Chain," in the April/May 2005 issue of Supply & Demand Chain Executive.

 For more information on the current state of the payment solutions market, see the article "The Analyst Corner: Payment" in the December 2004/January 2005 issue of Supply & Demand Chain Executive.

 Enabling the end-to-end purchase-to-pay process may seem daunting, but the benefits are hard to ignore. Read the best practices article "The Analyst Corner: Payment" by Christopher Sawchuk and Joseph B. Lancaster III of The Hackett Group, in the February/March 2004 issue of Supply & Demand Chain Executive.