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Managing cashflow: the crucial changes CFOs must make right now

By Nick Jackson, president at CIMA and finance transformation leader at Oracle


Cash has always been king; but what used to be considered enough cash in hand has now changed dramatically. Hard decisions have had to be made over the past few months. Where possible, payments have been deferred and working capital scrutinised. But beyond these immediate actions, CFOs need to understand how their choices will change patterns of working capital in the future. To safeguard business continuity and survival, CFOs must embrace this change, while acting quickly to make strategic decisions about how to manage it long-term. The goal is to build resilience without losing agility.


Balance and resilience

Following any initial cost-cutting, CFOs should focus on putting resilience at the centre of their strategy. The first step is to look closely at their cost base, to properly understand how cost, productivity, and prioritisation take shape across the business. This is evidenced with 86% of CFOs still planning to implement cost containment measures. Identifying these insights will require the CFO to be able to access information from across the front and back office. This means working more closely with every department to make accurate, joined up decisions, taking advantage of data sharing and collaboration.

When deciding where to reduce costs further, such insights will aid better decision-making. They will also help to secure the backing of colleagues when deciding how vital remaining expenditures are. Crucially, this approach needs to balance cost reduction against the potential impact on business performance as CFOs look to build much-needed resilience into their business’ financial strategy.

One example of building resilience is a reprisal of buffer reserves: for example, having three months of cash reserves available, or establishing stock levels that can sustain operations for periods of disruption. CFOs need to preserve continuity as much as possible – but they also need to plan more for the unpredictable. Conducting speedy impact analysis and scenario planning will help to create this resilience, addressing current needs as well as exploring potential future black swan situations.

AI solutions can prove invaluable for scenario planning, taking the pressure off the CFO by analysing and interpreting vast quantities of data in little time. These can also automate the repetitive, yet necessary, tasks associated with managing lots of data. In turn, this can enable the CFO to work more effectively with different departments, making intelligent decisions that will keep the business healthy in the long-term and build real resilience.


Investing in resilience

One area in which we will likely see more investment initially, rather than cost-cutting, is the supply chain. The supply chain particularly needs to become much more resilient, as well as agile enough to adapt to change. This is highlighted by the fate of some high street retailers at the start of this crisis. Seemingly stable, surprise collapses have shown how profitable organisations can quickly suffer due to the cashflow hit. Greater understanding of, and collaboration with supply chain operations would help mitigate this, allowing the CFO to shore up the supply chain and prioritise changes that matter most. It’s clear that investment is key to making this possible and mitigating future exposure to potential crises.


The CFO at the helm

To stay afloat in difficult times, continuous scenario planning and modelling should be made a priority. This requires more accessible data that provides the CFO with the insights to model potential outcomes and ensure agility. The CFO is in a unique position, able to gather intelligent insights into the costs and values of every department and work closely with them. For this reason, they can’t be afraid to be a catalyst for real change – immediate changes to their cost base, the resulting operational changes, and especially changes to the way business is run and structured in the future.

Cost-cutting might be inevitable to shore up the sustainability of the company, and it will be the CFO making these decisions. In doing so, it’s just as important to also think ahead. The CFO needs to guard the bottom line, to create resilience now and for the future. Keeping this balance requires making data more accessible and exploiting it for the best outcome. It will also provide the CFO with the required insights to model potential outcomes and ensure agility, working closely with the rest of the business to do so.



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