“Cash is king” is drilled into finance professionals’ heads from their first day on the job! And there’s a great reason for that – companies that can tap into an optimal amount of cash at the end of every month are in a better position than the competition.
David Peters, a seasoned CPA and founder of Peters Tax Preparation & Consulting in Richmond, Virginia shared a handful of proven ideas to consider during a webinar presentation, “More money at the end of the month: strategic ways to boost cash flow.”
Peters stressed the need for CFOs to control expenses. Good news: Often it’s the largest line item expenses that can be pared down to boost cash flow. Peters advises companies to key in on and attack those expenses first because there’s usually an opportunity to reduce costs.
4 ways to keep more cash on hand
Delayed hiring is one obvious way to boost cash flow, as Peters points out. Plenty of companies are doing just that as recessionary signs flash on the horizon.
Peters also recommends a few day-to-day ways to improve cash flow. CFOs need to be asking tough questions and be willing to draw a clear line in the sand:
- “Do we really need this? If we do, do we need it right now?” You can’t be afraid to challenge company norms, especially in challenging times. Bonus: You’ll prime managers and staffers to consider financial costs better in their strategic thinking.
- “Is there a cheaper way of doing X?” Be prepared to challenge department heads to look for alternatives. Those alternatives may include switching vendors, eliminating a costly process, reducing headcount and so on.
- Don’t be afraid to say NO. Being a finance leader means protecting the company’s assets. Don’t let them walk out the door if you can prevent it. As the gatekeeper, there’s nothing wrong with asking people WHY they think an expense is worth it. Insist the person or group asking back their case with data so they’re thinking in terms of what’s best for the company.
Bottom line: Improving cash flow is simple in concept but is difficult to implement. Often it involves change, such as learning how to attract new customers or improving employees’ behaviors. And it falls on the finance leader to identify and push for those changes to improve revenue.