What is cash flow monitoring?

Cash flow monitoring involves tracking a company's financial inflows and outflows. It ensures that every deposit and withdrawal is accounted for and analyzed.

This practice is crucial for effective cash management. Cash flow monitoring is a systematic process to oversee a company's inflows and outflows. It ensures liquidity, guarantees sufficient funds to meet all current obligations, and supports informed financial decisions.

How does cash flow monitoring work?

To successfully use cash flow monitoring, you need to follow a few steps. We will demonstrate these steps using the liquidity management software from re:cap. 

1. Collect data 

First, you need to connect your bank accounts. With re:cap Insights, you can select your bank(s) from over 14,000 banks. It allows you to view all financial transaction data in real-time.

2. Structure data

Collecting data is just the start. To truly understand it, you need to organize it effectively. re:cap Insights leverages AI to automatically categorize your transactions while you can create and adjust categories as needed. For cash flow analysis, you can break down the data into operational cash flow, investment cash flow, and financing cash flow. Additionally, you can view your data across various periods – weekly, monthly, or quarterly.

3. Gain real-time overview

Your data is organized and ready. Start your cash flow monitoring process by getting a clear view of your cash flow and all your cash positions. On the re:cap dashboard, you can see key cash flow information – e.g., bank accounts and balances – at a glance, all in one place.

4. Implement cash flow monitoring

Once your cash flow data is collected, organized, and easily accessible, it's time to focus on real-time monitoring. Set up specific rules for key transactions or metrics to monitor deviations or unusual activity. With re:cap Insights, you can create tailored rules to help you track and address anomalies in your cash flow.

5. Compare actual and planned values

For effective cash flow management, you must compare your planned figures with actual results. By using re:cap Insights and its feature Plan vs. Actuals, you can match your actual revenue, costs, cash flow, and balances against the projections in your business plan. This comparison empowers you to plan more accurately and tackle issues before they escalate.

6. Create reports

Cash flow and the financial stability of your company are essential information for various stakeholders. Therefore, you should create reports for different audiences, including management, investors, and individual teams. With re:cap Insights, you can easily track and extract the most important numbers.

Key factors in cash flow monitoring

Monitoring revenues and expenses 

Cash flow monitoring deals with financial transactions made through your business accounts, including revenues and expenses.

• Revenues: keep an eye on all incoming cash, including customer payments, interest income, and proceeds from asset sales.
• Expenses: review all outgoing cash, such as payments to suppliers, salaries, rent, interest, and taxes.

Identifying trends and patterns 

With cash management software, you can collect and analyze your cash data in real-time. This allows you to identify trends and patterns within your cash flow, and understand seasonal fluctuations, recurring revenues or expenses, and other financial cycles. Additionally, you can improve cash flow planning and create cash flow forecasts with this data.

Risk management 

Cash flow monitoring helps you identify and address potential liquidity shortages or financial risks early before they become major problems.

Basis for decision-making 

Cash flow monitoring provides essential insights for key financial decisions, including investments, loans, and payment term adjustments.

Benefits of cash flow monitoring

• Securing liquidity: keep your company’s finances robust by ensuring adequate funds are available to meet ongoing expenses and costs.
• Early problem detection: spot potential financial issues early to implement preventive measures and avoid surprises.
• Enhanced financial planning: regularly monitor and analyze cash flows to refine your financial planning and budgeting with greater accuracy.
• Optimal fund utilization: maximize the use of excess funds by exploring investment opportunities or reducing debt.

Tools for cash flow monitoring

For cash flow monitoring, you can use various software that support you:

• Cash flow statement: Regularly prepare cash flow statements to keep a clear picture of your company's financial health.
• Dashboard for a better overview: Utilize dashboards to get an instant snapshot of your financial status—view real-time bank account balances, track deposits and withdrawals, and monitor key financial metrics.
• Automated notifications: Implement an early warning system to promptly alert you to any deviations in cash flow, unusual transactions, or changes in cash balance.

Tip: With re:cap Insights, you get real-time cash flow statements and automatic transaction categorization with a 97% accuracy rate.

Conclusion: cash flow monitoring

Regular cash flow monitoring is essential for maintaining your company’s financial stability. By consistently tracking your cash flow, you gain a clear view of how money moves through your business, uncover potential gaps, and make necessary improvements.