King Cash

I was reading a recent article on Journal of Accountancy where an experienced consultant that worked with Fortune 500 and Fortune 1000 companies was quoted as saying...

“It’s pretty amazing how fast companies can burn through what seemed to be a very adequate balance sheet” when dealing with the onslaught of the pandemic.

I know. Cash is King!

A tried and true statement during challenging times and certainly during times when the entire global economy came to a screeching halt for a period of months. So how does the finance executive ensure that the organization acquires cash? This question dovetails into another article from AccountingToday discussing a recent survey of 330 CFOs and finance leaders. PwC, the company that conducted the survey, summed it with a major point:

“Companies are heavily focused on revenue. They’re focused on how do you stabilize revenue and how do you grow revenue in a different environment.”

So to answer my question…

1. Revenue - money, make lots of it.

Press hard to strengthen existing sources of revenue, find and develop new sources, then shore those up and pour on the coals. From the survey: “63 percent of respondents expect that changes in product and service offerings will be most important to rebuilding or enhancing their revenue streams, other revenue growth opportunities include changes to pricing strategies (41 percent), distribution channels (36 percent), talent (34 percent), customer segments (34 percent), deals (31 percent), new markets (26 percent) and the supply chain (25 percent)".

2. In the making of revenue, don’t spend more than you make.

“In terms of financial actions, 79 percent of the CFOs surveyed are considering implementing cost containment”.

3. Don’t commit to expenses that you don’t have the money to purchase.

From CFO’s surveyed on CFO.com “... the crisis has underscored the fact that leverage is a form of risk. Many CFOs we have talked to want to de-risk by borrowing less…”

4. Little by little put cash in a reserve fund and then REFUSE to spend it.

A recent survey on Expertise.com reveals the following survey of companies with 100 or fewer employees:

How long the businesses surveyed felt they could stay afloat with the cash they have on hand:

• 1-3 months: 26%

• 4-6 months: 26%

• 7-9 months: 8%

• 10-12 months: 7%

• more than 12 months: 13%

• don’t know: 16%.

What about the remaining businesses in the survey? They have already shut down.

5. Realize that financial management is not some job to win favor, be popular or well liked.

Rather, successful financial management implements financial control and policies that ensure the organization invests the right amount of funds to seize business opportunities, expand revenue growth and above all ensure the continued survival and expansion of the organization and its personnel.

Hold the line!