Unlock the Cash You Need – Now and for the Future
Working capital and cash preservation are top of mind for finance professionals as inflation persists and interest rates rise. According to a recent Association for Finance Professionals (AFP) survey, finance executives rank protecting cash as their top priority (63%), and organizations are also building liquidity buffers (34%).1
Businesses that effectively manage cash flow will ensure the working capital needed for continued operations. Some are raising prices to offset inflation. Others are cutting expenses. Many are doing both. 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 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.
Contact Synovus Treasury and Payment Solutions, your Treasury Consultant, or Relationship Manager for help with working capital management.
Balance receivables for better cash flow.
For many companies, timing and collection are the biggest challenges in working capital management. Shortening your payment cycle brings cash in the door faster, but a smart receivables strategy involves a delicate balance of discounts, volume negotiation and payment terms. Appropriate receivables management also acknowledges that relationships matter, so it’s important to proceed with specific customers in mind.
- Optimize the collection mix: Every business has a mix of customers, and terms that work for one might not be right for another. Be strategic about using discounts and appropriate terms for different customers based on volume and value.
- Improve controls and risk management: The goal is to maximize cash flow while minimizing the risk of fraud, error, and loss. Your credit and collection policies must reflect segregation of duties and other solid risk management procedures.
- Streamline processes: Does your business have a billing and collection plan that will accelerate cash availability for your working capital needs? Now’s the time to fine-tune your AR processes to meet your cash management goals.
Understand short- and long-term liquidity needs.
During a crisis, short-term liquidity needs will be different than normal times. New cash flow forecasts are required to understand your short- and longer-term liquidity needs.
Sound liquidity management involves a deep dive into your bank account structures and fund allocation strategy to ensure you’ll have the cash you need when you need it.
Optimize your bank account structure: Implementing a strategic bank account structure allows your company to minimize fees and maximize cash visibility. This means better use of funds and instant access to your day-to-day cash position and liquidity profile.
Better fund allocation: Optimal asset allocation helps you minimize risk, maximize return, and ensure the liquidity you require for operations. You’ll need to revisit this mix frequently.
If there were ever a time for more agility, stability, and better performance, this is it. Good working capital management has a direct impact on a company’s performance, enabling the organization to maximize cash, improve costs and efficiencies, manage risk, and achieve strategic benefits.
For help with working capital management, simply complete a short form and a Synovus Treasury & Payment Solutions Treasury Consultant will contact you with more details. You can also stop by one of our local branches.
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Important disclosure information
This content is general in nature and does not constitute legal, tax, accounting, financial or investment advice. You are encouraged to consult with competent legal, tax, accounting, financial or investment professionals based on your specific circumstances. We do not make any warranties as to accuracy or completeness of this information, do not endorse any third-party companies, products, or services described here, and take no liability for your use of this information.
- Association for Financial Professionals, “2022 AFP Liquidity Survey,” June 2022 Back