Unlock the Cash You Need – Now and for the Future

Working capital and cash preservation are top of mind for finance professionals in the wake of the coronavirus pandemic. According to a recent Association for Finance Professionals (AFP) survey, finance pros rank protecting cash as their top priority, and organizations are taking significant measures to build “liquidity buffers.”1

Seventy percent of survey respondents reveal they are delaying capital expenditures, and many organizations are delaying hiring new employees (69%) or have implemented a hiring freeze (61%). In addition, 88% of respondents are prioritizing cash forecasting with a longer forecasting horizon, reflecting an increased focus on liquidity.2

Businesses that effectively manage their cash will ensure the working capital needed for continued operations.

Companies with cash are more agile, stable and perform better.

“Businesses with more cash are more agile and more competitive,” the AFP reports. They are “more stable and better positioned to weather volatile economic conditions without having to resort to expensive short-term financing."3

The report also states that in every industry and in companies of all sizes, top-performing organizations manage their working capital up to four times better than their below-average peers. Even marginal improvements in working capital management can free up significant sums of cash.

How to unlock working capital when it’s needed most.

The key to effective working capital management is accessing locked-up cash in three distinct areas where best-in-class principles make a difference: payables, receivables, and liquidity management. Implementing capital management strategies that include optimization, improving controls, managing risks, and streamlining processes in these areas can deliver positive results for your organization.

Control payables to increase cash on hand.

Some companies make payments before vendors require them. Cash paid out earlier than necessary could be used for more pressing needs. Taking a few more days to pay your bills — and timing payments with your collection cycle — can keep cash in your pocket longer.

• Optimize the payment mix: You are not required to pay all your suppliers in the same way. An appropriate mix of payment types — card, ACH, wire, and checks — can extend your days payable outstanding (DPO).
• Improve controls and risk management: The pandemic has unfortunately increased occupational fraud and other risks. Tightening internal controls and identifying and addressing payables risk is imperative to smart cash management.
• Streamline processes: A healthy payables process eliminates errors and waste, ensures that invoices and payments flow smoothly, and gives executives insight into the payables stream.