3 Key Strategies to Ensure Liquidity for the Organization

Safeguard liquidity and build strategic objectives for the future – with a CFO Playbook finance organizations can reduce costs, increase cash visibility and better control cash flows for all in- and outgoing payments

Cash is king – this saying holds true again for organizations around the globe. In the past, low interest rates and easily available liquidity resources made external financing attractive for companies. The corona virus crisis, however, has pushed internal funding capabilities and cash back to the top of the agenda for CFOs and treasurers.

Having to extinguish fires due to the crisis, finance teams have realized quickly where the weak spots are that need to be addressed ― better transparency over company-wide liquidity is one of them. Unsurprisingly, 64% of respondents in a survey by Treasury Management International (TMI) said that liquidity issues are a worry for them, while external funding has become a challenge for 17% of organizations.

So, what can finance leaders do to address the issues? What helps to ensure liquidity and stability for the organization in the short-term, but also in the future beyond this crisis? The good news: In times of uncertainty finance and treasury have a chance to advocate for change. Now they have a great chance bring this change to life – with a strategic roadmap to support and stabilize their organization.

  1. Get Central Cash Visibility: Knowing the current cash position with real-time information on inbound cash flows and centralized control of bank accounts is an important starting point. Anticipating, as accurately as possible, how much liquidity will be needed in the coming weeks and months is essential for completing the picture. In times of major disruptions to supply chains, slumps in demand, and uncertainty as to when the economy will recover, reliable and up-to-date information is needed to simulate worst and best case scenarios. While 42% of respondents in a recent Serrala survey said they don’t feel that current cash business processes or tools meet their needs, there are solutions out there. These solutions can provide immediate transparency and can be extended over time ― CFOs can become game changers for their organizations by making this offensive maneuver. The focus should be placed on enabling more central collection and harmonization of data including bank information, obtaining central visibility over the global cash position, and optimizing liquidity forecasting and planning with automated and digitized processes.
  1. Keep Cash Coming in Fast: The corona virus crisis is negatively impacting on almost all industries and markets. Some of your customers may go bankrupt and consequently default on payments. All the more important, therefore, to ensure you have the accounts receivable (AR) processes and tools in place to keep as much cash coming in as possible to safeguard your financial stability. Advancing your collections process to further decrease DSO and enhancing your customer journey at the same should be top priority right now. Make it as easy as possible for your customers to pay your invoices and set your credit management parameters more proactively since payment behavior is likely to change and experiences of the past are likely to no longer hold in these unprecedented times. If need be, upgrade and digitize the processes that allow your finance teams to collect receivables efficiently even when working remotely. A 50% increase in efficiency for collections teams is possible, as experience shows.
  1. Control Spend Efficiently: Keeping your outbound payments under control is another important way to ensure liquidity. While you need to maintain good relationships with your vendors you also need to control which bills you pay. And when, so you don’t run out of cash. To find the optimal balance, you will need central visibility into how many payments your organization actually makes ― globally. One of the key problems is that cash-out processes are not always streamlined and harmonized across a company, leading to a lack of transparency. By centralizing the processing of all payment types and methods in an integrated environment that supports your CFO agenda you are back in the driver’s seat. That way you can steer payments more efficiently and help optimize your working capital.

Play and Win the Game

CFOs have the opportunity to build and shape a new game plan. After tackling the immediate cash crisis caused by corona, now is a good time to go on the offensive, embrace systemic changes and take the opportunity to optimize processes and tools. Further digitization in finance functions is the key for success. Acting rapidly now will deliver an immediate return on investment and help your organization increase its resilience and prepare it for future crises.

To help CFOs navigate these complex decisions, Serrala has developed a CFO Playbook. This set of interactive virtual events and vast library of assets will provide CFOs – and their finance organization – with the guidance they need to achieve best-in-class cash visibility and finance process efficiency. It includes expert advice and real-world customer scenarios so you can build a game plan to position your company to win in the current and to restart for the post crises economy. Discover our CFO Playbook and how to ensure liquidity for the organization today.

https://cfo.serrala.com/ensure-liquidity