For finance leaders, promoting a culture of cash could make sense

Introduction

The king is back on the throne.

Cash is once again front and center for corporate finance executives, as they face a challenging economic environment. Indeed, given current economic headwinds—ongoing interest rate hikes to curb surging inflation,¹ tremors of a looming recession, and ripples from geopolitical unrest—CFOs may find it imperative to reach across the company and turn the institutional focus to rigorous liquidity management.

It's likely that some sitting finance chiefs have little or no experience managing in a high-interest-rate environment. What’s more, applying a lens of liquidity to almost every decision can be more challenging than it seems, requiring substantial shifts in alignment and corporate mind-set.

Difficult or not, this renewed emphasis on managing cash isn’t likely to go away anytime soon. For finance executives tasked with the job, cash-flow forecasting tools can help. Simply put, such modeling is the window into building an integrated, operations-based view of cash flow. Companies that take this approach may not have the best model or the most comprehensive assumptions to go on. But they can be better positioned to provide organizational transparency into how each function influences and measures the effect of their behaviors on liquidity. In addition, scenario-building around liquidity boosts confidence amid economic turmoil while accelerating decision-making.

In this edition of CFO Insights, we’ll explore how CFOs can help spread a “culture of cash.” By improving their approach to cash-flow forecasting, finance teams can gain a clearer understanding of how to bridge funding gaps and identify issues that are having a negative impact on liquidity. This, in turn, can help provide an all-important buffer during times of uncertainty.

Endnotes

¹ “Inflation Cooled Just Slightly, With Worrying Details,” New York Times, February 14, 2023

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