The Role of Cash Management in Dynamics 365 Business Central

Maintaining financial stability and guaranteeing long-term success in the hectic corporate environment of today depends on good cash management. Dynamics 365 Business Central provides a complete suite of tools meant to simplify financial management, maximize cash flow, and improve cash flow reporting. This blog looks at how cash management in Dynamics 365 Business Central can help companies of different sizes.

What is Cash Management?

Cash management is the collecting, handling, and application of cash. It covers a spectrum of tasks including bank account management, transaction processing, cash flow forecasting, and liquidity assurance. Good cash management enables companies to keep enough money for their needs, make investments in expansion prospects, and stay out of financial hot water.

Dynamics 365 Business Central: An Overview

Combining several business functions, including finance, sales, purchasing, inventory, and project management, Dynamics 365 Business Central is a strong enterprise resource planning (ERP) solution (Microsoft Dynamics ERP) meant for growing businesses. It offers a unified platform for handling financial operations, improving performance, and guiding wise decisions.

Key Features of Cash Management in Dynamics 365 Business Central

1. Bank Account Management

Dynamics 365 Business Central lets companies configure and oversee several bank accounts. Users can open bank accounts, track purchases, and reconcile statements. This function guarantees correct tracking of cash inflows and outflows, therefore lowering the chance of mistakes and disparities.

2. Cash Flow Forecasting

One of the best things Dynamics 365 Business Central offers is its ability for cash flow forecasting. Based on past performance, present activity, and future expectations, companies can produce both long-term and short-term cash flow projections. This guides proactive financial decisions and helps to forecast surpluses or shortages of cash.

3. Automated Bank Reconciliation

The automatic bank reconciliation function streamlines the matching of internal records with bank statements. It guarantees that the financial data is correct and up-to-date. This helps lower mistakes and manual labor.

4. Cash Flow Reporting

Dynamics 365 Business Central provides comprehensive features for cash flow reporting. Users can create detailed reports including analysis of financial situation, liquidity levels, and cash flow trends. Making strategic decisions and monitoring performance depend on these reports.

5. Integration with Other Modules

Dynamics 365 Business Central's cash management module deftly connects with other modules including accounts payable, accounts receivable, and general ledger. This integration guarantees synchronization of all financial data, therefore offering a complete picture of the financial situation of the business.

Benefits of Cash Management in Dynamics 365 Business Central

1. Improved Financial Visibility

Real-time access to cash flow data allows companies to better see their financial situation. This helps them to control liquidity, make wise decisions, and prevent cash flow issues.

2. Enhanced Efficiency

Automation of cash management processes lowers the chance of mistakes and lessens the manual labor required. This results in higher efficiency, which frees finance teams to concentrate on strategic activities instead of daily administrative work.

3. Proactive Decision-making

Cash flow forecasting and reporting solutions give insightful information that enables companies to plan appropriately and predict future cash demands. By the use of this proactive method, businesses are guaranteed to be ready for any financial difficulties that might develop.

4. Cost Savings

Good cash management can maximize cash flow, lower borrowing costs, and improve investment returns, resulting in saving money. Companies can better control resources and get better financial results.

5. Compliance and Accuracy

Dynamics 365 Business Central guarantees accuracy and compliance with accounting standards and rules. Accurate reporting features and automated procedures enable companies to keep financial integrity and prevent compliance problems.

Read more: Dynamics 365 Business Central Financial Management

Implementing Cash Management in Dynamics 365 Business Central

Configuring cash management features in Dynamics 365 Business Central calls for multiple actions, which include:

• Create bank accounts
• Configure payment methods and payment terms
• Configure customer or vendor bank accounts
• Configure payment registration

Let’s check out them, one by one:

1. Create Bank Accounts

The initial step in cash management involves setting up bank accounts. You can do it through the Bank Account lists page, where you can make a Bank Account card, allocate single or multiple currencies, and configure the Posting Groups for bank transactions.

To manually configure a bank account for processing transactions, follow these steps:

• Search for “Bank Accounts” and select the link.
• Click “New” to create a new Bank Account Card.
• In the General FastTab, enter the No., Name, Bank Branch No., and Bank Account No. For U.S. accounts, enter the bank’s 9-digit routing number in the Bank Branch No. field and the account number in the Bank Account No. field.
• In Communications FastTab, provide the bank’s address details.
• In the Posting FastTab, assign a Bank Acc. Posting Group to ensure transactions are posted to the correct G/L Account.

Note: Verify that the G/L Account connected to the Bank Account has "Direct Posting" switched off. To guarantee a match between the bank account sub-ledger and the general ledger, changes should be made through the bank account rather than straight to the general ledger.

(Source: Microsoft)

Creating a bank account allows you to additionally configure electronic banking services. Many banks provide electronic services to automatically handle transactions such as credit transfers for vendor payments or importing bank statement files. Specify how you want files exported and imported in the Payment Export Format and Bank Statement Import Format fields of the Transfer FastTab of the bank account card.

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2. Configure Payment Methods and Payment Terms

In the next step, configure payment systems that specify how customers pay your company and how your company pays providers. Payment options can vary and include bank, cash, cheque, or account. Once set up, these ways can be allocated to customers and vendors in the Payments FastTab of their respective cards.

To configure payment methods:

• Search for “Payment Methods” and select the link.
• Click “New” to create a new payment method.
• Enter the Code and Description for the payment method.
• For cash payments, you may want to enter an account for automatic balancing. Specify the Bal. Account Type and Bal. Account No. for the balancing entry.
• Check the Direct Debit field if the payment method is for direct debit collection; otherwise, leave it blank.
• Select a Direct Debit Pmt. Terms Code if applicable.
• The Pmt. Export Line Definition specifies the data exchange definition used to export payments.
• Use the Bank Pmt. Type field to specify the payment type required when exporting payments with the selected method.

(Source: Microsoft)

Additionally, configure general payment terms through the Payment Terms page. Payment terms manage due dates and payment discounts. You can create multiple payment term codes and assign them to customers and vendors.

To configure default payment terms:

• Search for “Payment Terms” and select the link.
• Click “New” to create a new term.
• Enter a Code, Due Date Calculation, and Description.
• If offering a discount for early payment, enter the Discount Date Calculation and Discount %.

Once payment methods and terms are configured, assign them to specific vendors or customers:

• Search for “Customer” or “Vendor” and select the related link.
• Select the specific Customer or Vendor Card to edit.
• In the Payments section, select the Payment Terms Code and Payment Method Code to assign.

3. Configure Customer or Vendor Bank Accounts

In Business Central, you can configure multiple bank accounts for a customer or vendor. Customer bank accounts are useful for refunding credit memos, while vendor bank accounts provide the necessary information for processing payments. To create a bank account for a customer or vendor, first select the relevant customer or vendor.

To create a customer or vendor bank account:

• Search for “Customers” or “Vendors” and choose the related link.
• Select the specific Customer Card or Vendor Card, then go to More Options > Related > Customer or Vendor > Bank Accounts.
• Click “New” to create a new bank account.
• In the General FastTab, enter the Code, Name, and address details for the bank.
• If the bank uses your local currency, leave the Currency Code field blank. Otherwise, enter the bank account’s currency.
• Enter the Bank Code, Bank Branch No., Bank Account No., and Transit No.
• In the Communication FastTab, enter any communication details, such as Email and Home Page.
• In the Transfer FastTab, enter the SWIFT Code and IBAN for the bank account.
• If using the Bank Clearing Code field, set the format standard in the Bank Clearing Standard field and enter the Bank Clearing Code accordingly.
• Select “Use for Electronic Payments” if this bank account will be used for electronic payments.

If a customer or vendor has multiple bank accounts, you can configure a preferred bank account for default use. For customers, this account will be used for refunds and direct debit collections. For vendors, it will be used on payment journal lines for export to a payment bank file.

To set a preferred bank account:

• Search for “Customers” or “Vendors” and select the related links.
• Open the Customer Card or Vendor Card to configure a preferred bank account.
• Expand the Payments FastTab and select “Show More”.
• Set the preferred bank account in the Preferred Bank Account Code field.

4. Configure Payment Registration

Payment registration helps balance internal accounts using actual cash figures, ensuring efficient payment collection from customers. Business Central uses AI to match actual figures with bank statements, enabling quick verification, posting, and processing of discounted payments. Before processing customer payments, select a balancing account on the Payment Registration Setup page.

To configure payment registration:

• Search "Payment Registration Setup," then choose the link.
• Choose the Journal Template Name and Journal Batch Name for the payment registration window.
• Mention in the Balancing Account Type field whether balancing entries need to be posted to a bank account or G/L account.
• Select whether to automatically fill in the date received or use this account as default.

(Source: Microsoft)

In summary, directly affecting a company's liquidity, profitability, and general financial situation, cash management is a vital component of financial management. A strong range of solutions available from Dynamics 365 Business Central helps to simplify cash flow, improve financial reporting, and streamline cash management practices. Using these capabilities will help companies to have better financial visibility, increase productivity, and make proactive decisions pushing success and expansion.

Improve Your Cash Management with Dynamics Square

Long-term performance and financial stability depend on mastery over cash management. With over 12 years of experience as a Microsoft Gold partner in the USA, Dynamics Square provides complete solutions including bank account administration, cash flow forecasting, and automatic bank reconciliation.

Banking on the team of expert consultants, we can help you to fully utilize these tools to maximize your cash flow. Partner with Dynamics Square to improve your cash management strategies, thereby guaranteeing improved financial insight, more productivity, and proactive decision-making, driving success and growth.

For assistance, call us at +1 281 899 0865 or email us at arish.siddiqui@dynamicssquare.com. 

Also Read:

Step-By-Step Guide to Process Vendor Payments in Dynamics 365 Business Central

10 Best ERP Software for Small Businesses in 2024

How to Perform Bank Account Reconciliation in Business Central?

A Guide to Reporting Tools for Dynamics 365 Business Central

Business Central Implementation