It is a proven statistic that Cash Flow Management is one of the hardest things for any Start-up or SME. With the business focus on Customer Acquisition and Revenue Generation, it can get difficult for Entrepreneurs or CEOs to focus on where and how quickly, the cash gets burnt.
QuarkCube’s Out of the Box Solution for Cash Flow Management is precisely aimed at helping business leaders not only stay on top of their Cash Flow but also analyze the Cash Flow data to make informed business decisions.
As a Business Operations Collaborator at QuarkCube, I am evidently and successfully managing our Cash Flow through our Platform and so are our customers. This Cash Flow model is a solution to a common business problem and can be implemented by any company.
To share how this can be easily achieved, I am accounting one of our Customers’ experience of how they used QuarkCube’s Cash Flow Model to manage their cash flow. To begin with, here’s what they needed to know:
Where is our cash going and when will we burn out our cash?
What if there is an unexpected expense, will we be able to meet it?
When will we be able to afford to expand the business?
And within a month of using the platform’s capability to track, forecast and analyze every business expense & income, our customer’s Business Operations team were able to seek an answer to all of the above questions by:
Generating Financial Statements like Cash Flow and P&L including both Forecast and Actuals
Monitoring cash position and evaluating business performance with the help of the Analytics Dashboard
Strategic Planning and making Data-driven decisions with ‘What-if’ Scenario Analysis
Generating a ‘Closest-to-accurate’ Cash Flow Forecast was never simpler
The platform has a multi-dimensional Cash Flow Model that allows the grouping of related data into multiple levels of predefined and customizable hierarchies under various dimensions like Account, Supplier, Customer, Payroll, Scenario, Date etc. From this Model Data, the reports get generated as per the defined layouts of financial statements like Cash Flow and P&L. Here’s how the dimensions help group the data:
The Scenario dimension segregates the data between Forecasted and Actual data
o The Account dimension has built-in hierarchy members that simulate the account heads of a Cash Flow statement like Operating Income, Total Cost of Sales, Operating Expenses, Direct Costs, etc. (Ref. Fig.1). While entering data on the platform, they were able to group every expense/income under a relevant account. They were also able to customize hierarchies as in the case of Supplier and Customer dimension. For example, they added a Supplier Entity as a parent member and the various services provided by that particular Supplier as child members. They also added every Contract Line Number as a child member. This helped them group and analyze the Supplier Expense at various levels including Entity Level, Service Type Level and Contract Line Number level. For e.g. By building a hierarchy for Supplier Atlassian, they could group the expenses incurred by Atlassian not only at the Entity Level, but also break them down to analyze how much they spent on Jira Service Desk alone or on a particular Contract Line ATLCON000002.(Ref. Fig.2
Every dimension has Attributes that create fields for input data. For e.g. The attributes of the Supplier Dimension include Name of Supplier, Frequency of Payment, Payment Terms, Contract Currency Type, Contract Line Number, Price with tax, etc. They were able to input all of this data by referring to their Supplier Contracts. Similarly, the Employee Dimension includes Name of employee, Date of Joining, Department, Annual Salary, etc.
The platform has a set of prewritten rules that compute the attribute values and generate forecasted data in the desired model format (also preset). For e.g. The company engaged with Supplier XYZ for their Software Hosting Services for an annual contract on 29th Jun 2020. As per the contract, they had to pay them USD 29,999 every 3 months with payment terms as 15 days after the invoice date. This data was added as attribute value on the platform.
After adding the data, the platform automatically forecasted an expense of USD 29,999 in the Cash Flow under the months of Jun’20, Sep’20, Dec’20 and Mar’21. (Refer Fig.3)
One of the striking features of the platform is the ability to show all data in the Cash Flow in a single desired currency type, by converting the input currency amounts in the desired type as per the conversion rate on the due date of payment. This means that whatever the contract currency type is, the forecasted contract expense is populated in a single desired currency type.
For adding the actual expenses and income on to the platform, they used the Data Integration feature to upload the list of all actual ledger transactions. This data was automatically tabulated in the Cash Flow Model as actual expenses or income.
Platform’s Cash Flow Forecast Analytics Dashboard provided key metrics to monitor business cash position and performance
The platform’s rules engine combines all the input actual & forecasted data and presents it within an in-built analytics dashboard. This dashboard helped with significant metrics like:
Forecast vs Actual Variance %
Forecasted Cumulative Income and Expenses
Net Profit %
With these metrics they were able to:
Monitor their cash position
Evaluate their business performance
Identify insolvency risks, if any
'What-if' Scenario Modeling was effective in helping make data-driven decisions
One of the most concerning factors for any company remains the probability of Unexpected Expenses that can throw business plans and payment schedules off track.
With ‘What-if’ Scenario Modeling, our customer was able to forecast their cash position under multiple financial occurrences like increase/decrease in expenses, income or a combination of both by just inputting an increase/decrease percentage number. For example, they were able to predict when their cash will burn-out if, there is an increase in their total expenses. (Ref. Fig. 5)
Case 1: 40% Increase in Total Expenses
Impact: Cash Balance Burnout by Jul’21
Case 2: 70% Increase in Total Expenses
Impact: Cash Balance Burnout by Jun’21
Case 3: 100% Increase in Total Expenses
Impact: Cash Balance Burnout by May’21
Similarly, they also derived implications from the Scenario Analysis and made significant business recommendations to their leadership for growth and expansion. (Ref. Fig. 6)
Scenario: 15% Increase in total expenses and additional Income of USD 7,00,000 from Apr’21 to Dec’21
Business Recommendation: “To achieve Break-even in 2021 and turn Net Profit Positive (0.31%), we need an additional Operating Income of USD 7,00,000 from Apr’21 to Dec’21. This will enable us to increase our expenses to a maximum of 15% and still remain Net Profit Positive & break-even by Dec’21”
Cash Flow Management can be easy for any company with QuarkCube’s Platform
By using QuarkCube’s Cash Flow Model, our customer’s business operations team managed to get a handle of their company’s Cash Flow in less than 2 weeks. Today, they have a fully automated Cash Flow Management System that helps them make data-backed business decisions, strategize to avoid unexpected scenarios and ensure resilience for seamless business operations. In my view, QuarkCube’s multi-dimensional data analytics platform can help any company manage their Cash Flow quickly, easily and effectively.
The platform also has the capability to integrate with other HRMS, ERP & Finance applications which will enable availability of all data on a single platform and providing a consolidated view with guided business intelligence.