Chief Financial Officers (CFOs) must master more than cash flow and revenue models. They must be strategic partners in the business. According to IBM’s Global CFO Study, there is a growing gap between the importance of financial responsibilities and broader strategic questions that affect a company’s long-term success. The importance of integrating information has more than doubled while the priority of risk management has risen a startling ninety-three percent. Nearly half the CFOs say their organizations are not effective in the areas of strategy, information integration and risk and opportunity management.
One of the most important ways a Chief Financial Officer can make their company more competitive is by accelerating cash flows according to the book “The Strategic CFO – Creating Value in a Dynamic Market Environment” published by the Wharton School of Business at the University of Pennsylvania. The following five strategies are just a sampling of some of the techniques used by many CFOs today.
Prepare a Cash Budget
Prepare a monthly cash budget with weekly forecasts to track actual cash against projections. This tool will enable you to better control where your money is going when and help you prioritize future expenditures.
Centralize purchasing for your firm within major profit and loss centers. This process reduces administrative costs. Standardized purchasing policies and systems promote efficiency by preventing duplication of efforts. When negotiating with your vendors, agree on the price of the goods and services first then negotiate as favorable payment terms as you can get.
Utilize Multiple Suppliers
Prevent costly supply disruptions which can bring sales and cash flow to a full stop. Use multiple suppliers for critical items whenever possible. Know your suppliers’ financial status so you can alleviate potential disruptions before they happen.
Turn Inventory into Fast Cash
Turn slow moving inventory into cash by discounting it to move quickly or by returning it to the vendor. Record any damaged inventory right away. This can save cash if the damaged merchandise was not sold. Unsold inventory can be written off as a loss for income tax purposes.
Focus on Return on Investment (ROI)
The link between your invoicing and cash flow is paramount. Streamlining your accounting system to make sure you can measure the profit on each item sold and each service rendered is critical. This makes it easier to measure your ROI and makes your customers happier as well because you are more efficient in your accounting operations. See the Pacific Crest Group (PCG) case study titled “Accounting Challenge for Local Professional Services Company” for more ideas on successful cash flow management strategies.
Pacific Crest Group (PCG) provides professional services that keep your business focused on your critical objectives. We provide strategic Accounting and Human Resource (HR) services created specifically to help you meet your goals. Through exemplary customer service, clearly defined policies and procedures as well as a forward looking perspective, we provide the outsourced solutions that your business needs to grow. A PCG professional is happy to meet with you to discuss solutions for your unique requirements designed to maximize all of your business opportunities.