Cash & Liquidity ManagementCash ManagementCash management systems on the rise in SME sector

Cash management systems on the rise in SME sector

Smaller businesses are turning to software solutions to help them control their cash flows, a study by Commerzbank has revealed.

A growing number of small businesses are realizing the benefits of cash management systems, according to a new study. As liquidity management becomes more complex, many are investing in high-performance software with a view to increasing profitability and reducing risk.

The study involved 280 finance managers from small and medium-sized enterprises (SMEs) in Germany. It was conducted by the Fachhochschule des Mittelstands (FHM) in conjunction with Commerzbank, and followed on from similar studies in 2015 and 2017.

Respondents were surveyed online between January 10th and February 1st 2018, and their responses were evaluated anonymously. The aim was to gain an overview of SMEs’ cash management systems, determining how often they are being used and with what degree of professionalization.

Compared to 2015, the most revealing finding was an uptick in the numbers using cash management software. Three years ago, the figure was just over a third (36%). Now it is more than half (54.5%), indicating that the demands placed on financial management are increasing.

However, the study also found a striking lack of uniformity between one business and the next. While some companies use very simple systems, managed by a single employee, others consider cash management the remit of the entire finance department. These differences are as much a matter of the company’s ethos as the company’s size.

“There are certainly smaller companies which make full use of cash management systems that involve several employees, for example if the monitoring of incoming payments are the direct responsibility of individual employees in sales,” said Prof. Dr. Volker Wittberg, the academic head of the study at FHM.

Frank Oliver Wolf, head of Sales Payment Transactions and Foreign Trading Germany at Commerzbank, adds that the greater adoption of cash management systems comes down to digitalization and regulation.

“Following the latest regulatory developments, e.g. the European Payment Services Directive II, such systems have become more user-friendly and multi-bank capable,” he told The Global Treasurer. “That said, there appears to be disparate uptake. According to the findings, one possible factor is the company size. However, it may also be because, at some companies, the impetus to adopt these technologies is that much stronger.”

Reliance on bank software

Of the companies that did have a solution in place, 70% of them said they were using software from their bank. A further 26% used technology from software developers (a smaller proportion than last year) and just 4% had developed their own solution.

As the report explains, banks and software developers now tend to offer very similar software packages (including StarMoney, Windata, SAP Business One and Microsoft Dynamics Navision). Meanwhile, proprietary solutions are becoming less attractive owing to their upfront costs and the need for frequent customization.

Interestingly, mobile web applications do not yet play much of a role in businesses’ cash management systems. Despite their ubiquity in other areas of life, only 19% of the survey respondents can initiate and approve payment processes through an app, and just 10% said their app gives them full access.

“App solutions have become omnipresent in many day-to-day settings thanks to their user friendliness. This is also true of cash management systems if they provide sufficient security,” said Wolf.

Five in six of the respondents said they could only access the system via the computer on which it is installed, while 22% said they could log in through any web browser. Clearly, there are trade-offs to be made between security and accessibility. Only 10% of respondents said they let external users, such as accountants, access the sensitive data on their systems.

Another finding to emerge from the study is that fraud prevention has grown in importance. The vast majority of respondents (78%) said this is of high significance, compared to 71% last year.

Finally, two thirds (66.4%) of respondents said they thought digitalisation would lead to the expansion of their cash management systems.

“Digitalization has also arrived in the financial management of small- and medium-sized enterprises now that security reservations are abating,” said Wolf.

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