Cash Management

Cash Bashing

In crisis mode, a top priority for small and mid-sized companies has become managing cash flow more aggressively to keep the business going, a CFO ...
David W. OwensJanuary 6, 2009

How are finance executives from small and mid-size companies ensuring adequate capitalization over the next year? Faced with a no-growth outlook, many are refocusing their attention on wringing costs from their businesses wherever they can find it, according to a recent survey by CFO Research Services.

Nearly three-quarters of the 129 senior finance executives who responded to the November survey said reducing non-operating expenses will be more important this year than last year. The survey was sponsored by American Express, which advises corporations on controlling costs for business travel, payment systems, and other areas. Respondents’ companies ranged from $10 million to $2 billion in annual sales.

Asked to rank the importance of liquidity management activities in light of recent changes in the financial markets, the executives overwhelmingly picked improving working capital processes and forecasting cash flow as their top priorities. Finance executives are turning away from financing schemes and getting back to basics — taking costs out, running lean and efficiently, optimizing working capital, and overall keeping closer tabs on financial performance.

Finance is opening up the financial toolkit for whatever tools they can find to ensure their companies maintain the cash flow needed. Many respondents said they are exploring more creative, “one-off” types of actions to reduce liabilities and free up cash. Many said they plan to sell off less-productive or short-term assets, while others are looking to alternative financing arrangements — such as refinancing and leasing — to increase liquidity and optimize cash flow.

Interestingly, even in the face of recession, a substantial number of respondents said they are looking to grow market share, largely by targeting weakened competitors. These financial executives continue to have confidence in their own companies and their own ability to pull through, and perhaps even gain an advantage in the down economy.