Identify cash initiatives

Cash is king for most companies and it is important that the CFO allocates sufficient time towards identifying cash improvement initiatives across the organisation.

Here are some tips for identifying cash initiatives from members of the finance leader community:

Produce accurate cash flow forecasts

Review your customer receipts and supplier payments across the full financial year to understand their impact on cash flows.  This needs to cover the full year to avoid missing any cash flows for annual customers and suppliers.

Review pricing

Scrutinise your pricing levels to determine whether you are charging enough for your products and services.  Benchmark these against industry competitors and other companies who have adopted similar business models.  Determine ways in which you can speed up the conversion of your sales pipeline.

Improve customer cash collection

Analyse your customer billing dates and credit terms to check that these are optimised.  Review your general cash collection arrangements and also your specific contractual terms with key customers.  Identify opportunities to improve cash collection and ensure that you have strong relationships with key representatives at your clients so that you can quickly implement payment arrangements where required.

Analyse profit margins

Determine your profit margins across each key product line to determine opportunities to improve profits and cash flow contributions.  Identify and close down any loss-making initiatives that are no longer core to delivering your business objectives.

Negotiate supplier payment arrangements

Review your contractual payment terms for each key supplier and identify opportunities to renegotiate these in your favour.  Maintain close relationships with key individuals within these companies so that you can quickly implement payment arrangements when required.

Remove unnecessary expenditure

Challenge each line item of your expenditure to ensure that it is necessary towards achieving your company’s strategic objectives, such as growing revenue or maximising profits.  Remove any unnecessary expenditure that does not contribute towards these objectives.

Growth opportunities

Work closely with your management team and wider business to identify key growth opportunities.  These may cover a range of activities such as increasing your levels of focus towards your most successful activities, upselling new products to existing customers and expanding overseas.

Consider funding options

Determine your available options for funding, such as overdrafts, invoice discounting, debt factoring, bank loans and equity fundraising.  Calculate the cost of each option and consider its wider impact on your business and stakeholders.  Quantity the potential return on investment of raising additional funds to invest within your business initiatives and the associated risks and rewards of doing so.

Summary

Cash is essential to most companies and there are many ways in which an effective finance leader can improve cash flow levels within your company.  These include cash flow management, operational improvements and driving growth.

The finance leader plays a key role in generating additional cash flows to increase the levels of investment within your business, to fund expansion activities and to improve shareholder returns.