The CFO is responsible for ensuring a business’s finances are in check. They’re tasked with managing the financial actions and expectations of a company. When it gets down to the wire, the CFO is the decision-maker responsible for guiding the business into the black.
Managing and improving cash flow is central to CFO responsibilities. A lack of cash flow will hinder your growth and cause serious issues today and tomorrow. But a properly managed cash flow strategy opens a world of possibilities, giving you the freedom and flexibility to guide your company in whichever direction you choose.
This article from United Consumer Financial Services (UCFS) highlights the essential nature of cash flow management and provides helpful tips to CFOs looking to improve cash flow within their organizations.
Cashflow: The Crux of Business Health and Mobility
You can’t overstate the importance of cash flow for a business, regardless of the size or financial security of the organization. Cash flow shows how much money is moving in and out of a company; it’s the money you have immediate access to, not the funds in accounts receivable waiting for collection.
Positive cash flow signals that you’re bringing in more money than you’re spending, which means you have cash to cover expenses like payroll, overhead, and resources to invest back into your business. Negative cash flow shows the opposite.
In the past, cash flow responsibilities were outsourced to other team members, allowing CFOs to focus on other tasks. However, the shaky nature of our global economy highlights the need for CFOs to manage the cash flow of their organizations closely. A renewed emphasis on cash flow management requires CFOs to take hold of their company’s strategy and implement measures to effectively manage cash coming in and going out.
Below, we explore what every CFO should know about improving cash flow and the practical ways to do so.
How CFOs Can Optimize Cashflow
Here, we outline the three primary steps for optimizing cash flow within your organization.
Gather Data
The first step in optimizing cash flow is understanding current performance. The CFO should gather data concerning the cash intake and outflow. What is your company spending, and how much is coming in over set timeframes (every two weeks, monthly, quarterly, etc.)? Many enterprises see seasonal cash flow variations. Take this into account as you graph your numbers.
Intuition cannot show historical performance and won’t predict future numbers. Gathering reliable data is a crucial first step in building out a cash flow strategy uniquely created for your organization.
Compare against Industry Benchmarks
Once you have your business’s cash flow records, compare your numbers against competitors and industry benchmark data. While resource conservation is central to cash flow management, you won’t eliminate spending –– nor should you. CFOs must determine smart investment opportunities that will grow the business, and those efforts require financial commitment.
Comparing your organization against relevant benchmarks helps you identify areas with potential improvement. Overspending in one category while under-resourcing others drain your cash reserves and inhibits you from increasing potential cash flow. Understanding how you stack up against other industry leaders empowers you to make wise decisions for improved cash flow.
Set KPIs and Create a Plan for Execution
At this stage, you know your numbers and how others perform. It’s time to set KPIs specific to your goals. Which factors create value for your organization? How can you invest in those elements to see greater revenue?
CFOs must ask these questions to set relevant and realistic KPIs and then create a plan to execute and achieve stated goals. A few examples of KPI achievement could include methods to
- Reduce spending costs
- Increase revenue and improve margins
- Optimize working capital
Regardless of the areas you choose to focus on, the CFO must identify KPIs and initiate a plan your entire team will buy into.
Optimizing Cashflow in Day-to-Day Operations
Day-to-day billing protocols and procedures significantly affect your cash flow. Your billing department must process and distribute timely invoices to ensure prompt payment, a positive income stream, and immediately accessible resources. Every day your business goes without receiving compensation can be detrimental to your cash flow and long-term health and sustainability.
Many don’t have the large up-front cash to purchase big-ticket items if you sell products or services to consumers. That leaves them in the uncomfortable position of postponing (and possibly foregoing) purchases, settling for less than they desire, or delaying payment on their invoices, seriously disrupting cash flow. Shoppers want and need flexible payment options, and you need trustworthy financing solutions that deliver timely compensation to support effective cash flow management.
Partnering with a dedicated consumer financing firm ensures you’re providing exceptional service to your clients while reaping the rewards of outsourcing your financing. Choosing a trusted consumer financing firm like United Consumer Financial Services allows you to
- Provide low monthly payment options your customers and patients demand
- Expedite application and approval for customer financing
- Increase the likelihood that your customer will make their purchase
- Receive funding within 1 to 2 days from UCFS, which means you eliminate carrying costs associated with in-house financing programs
- Eliminate costs associated with collections.
An effective CFO delegates tasks to the appropriate, capable parties. Partnering with UCFS for dedicated financing solutions helps you improve cash flow while streamlining purchases and sales for everyone involved.
Solve Cash Flow Problems Before They Arise
Improving cash flow is challenging for every CFO, regardless of your industry or business. But when approached and executed strategically, cash flow management is the most effective way for you to sustain, build, and evolve your organization.
Cash flow will always be a concern, but seasoned CFOs know how to solve cash flow problems before they crop up. Creating systems to optimize your cash flow as you grow empowers you to advance your business. And United Consumer Financial Services can help.
UCFS provides consumer and patient financing services that allow you to provide affordable payment plans while receiving timely compensation, so your cash flow isn’t interrupted. Reach out to our team to learn how our financing options can boost your revenue, streamline your operations, and improve your cash flow.