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5 Strategies for Managing Cash Flow in Complex Business Conditions

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Cash definitely matters, but it matters more today than ever.

Thats what Vena CFO Melissa Howatson said at Excelerate Summit 2023 during the panel discussion, Managing Cash Flow in Complex Business Conditions.

Alongside Vena VP of Finance Muneerah Kanji and me, Vena VP of FP&A, as the moderator, we talked about leveraging technology, mitigating risks and optimizing cash flow for long-term financial stability.

With greater economic uncertainty and more complex business conditions globally, theres been a recent shift in focus among finance leaders from revenue growth to cash management. As the economy remains turbulent, capital has been harder to acquire and deal velocity has slowed. In the face of uncertainty, growth has waned, pushing finance teams to rethink their cash flow strategies to ensure they have cash at all times.

In this blog, I distill five strategies from my conversation with Melissa and Muneerah that will help you drive long-term success for your organization in a dynamic business environment. You'll learn how to go about leveraging technology, mitigating risks and optimizing cash flow for financial stability

Key Takeaways:

  • Prepare your scenarios early and prioritize ruthlessly to pivot faster.
  • Re-forecast frequently to align your long-range plan with your short-term operating plan.
  • Present to stakeholders your assumptions, models, indicators, scenarios, prepared responses and analysis of how each situation would affect the business.

1. Support the Business With Insights and Proactive Spend Management

With less accessible capital available, investors and lenders are looking for businesses that can demonstrate healthy cash flow management.

The cash conservation and a path to sustainable profitability is top of mind with both investors and lenders everywhere, said Muneerah.

Thats where your Office of Finance plays a critical role in enabling companywide, data-driven decision making. You're monitoring, analyzing and controlling cash flow. You identify where to invest and where to reduce spend to optimize efficiency. Your finance team needs to proactively model potentially difficult cash flow scenarios so your business can plan ahead and stay ahead of the curve.

Our current circumstances are a reminder for us to focus back on solid business fundamentals, as these are largely coming back to the spotlight. That has become very expensive, and this is forcing businesses to pay more attention to where, when and how they are making investments, explained Muneerah.

2. Have Your Scenarios Planned in Advance

Prepare ahead with your best, base and worst case scenarios. With a greater focus on efficiency and profitability, your business needs to respond quicker, especially when faced with the prospect of cash shortfalls.

The current environment gives a little less time to sit and reflect, said Melissa. So you need to be constantly leveraging that agile rolling forecasting and planning. You're also starting to focus on some shorter time horizons and needing to pivot accordingly more rapidly.

To remain agile, your business has to prioritize ruthlessly that means removing side projects and distractions, returning to basics and empowering your finance team to identify where time perhaps our most valuable asset besides cash is wasted and  where it should be redirected. Having fewer projects and focusing on the essentials allows your business, when needed, to pivot quicker.

3. Look at Your Plans and Your Projections on a More Frequent Cadence

Update your long-range plan frequently so you have enough runway to achieve your goals. But with longer-term plans in place that address how market conditions are constantly changing, you also need to ensure your short-term operating plan and your long-term cash flow forecasts are aligned.

The other factor I think that we should all consider is the frequency at which we're doing things the factor that companies need to keep in mind is to ensure that they're able to identify risks and mobilize teams sooner, keeping the changing environment in mind, said Muneerah. Previously we may have been okay to do just a quarterly forecast, but today's macroeconomic climate is kind of forcing the need to do this more frequently.

Knowing where your business is at, where it's going and what that looks like in uncertain, complex business conditions requires re-forecasting more frequently. It's essential for making proactive cash flow decisions as the business changes. Re-forecasting keeps not only your short-term operations aligned to your long-range plan, it also aligns both of these with the rapidly changing business environment and any unforeseen sudden economic fluctuations.

4. Build Your Confidence With Your Stakeholders

Collaborate with your stakeholders, such as budget owners and executive decision makers, and build their confidence by presenting your assumptions, models, indicators, scenarios, prepared responses and analysis of how each situation would affect the business. Communicating the whythe importance of these plans and that they're company plans (not finance plans), can improve business alignment and secure further stakeholder buy-in and trust.

[Your stakeholders] get it. They see what's happening out there, said Melissa. If you're having open and honest communication about where you're going with the business, and also soliciting advice and feedback from them on what they're seeing, that can be quite helpful. So I definitely would be keeping up that communication.

Fostering collaboration and transparency with other areas of the business helps your finance team set expectations around performance and obtain the most accurate cash flow information from your stakeholders. That way, you'll forecast much more accurately and keep your stakeholders expectations reasonable.

5. Make Sure That You're Leaving [Your Team] Enough Time To Analyze

Your finance team needs time to be able to perform data analysis that generates insights, builds stakeholder confidence and enables them to become better business partners. Muneerah said that leveraging technology gives your finance team more time for analysis and business partnering.

We live in a world where there's horrendous amounts of data out there, she explained. The trick for us is now to be able, not just to analyze the financial data we have, but to marry that up with the non-financial data to inform the business with insights and to do it in a timely basis. 

An integrated finance technology stack has never been more important than in these uncertain, complex business conditions. It can provide richer, actionable and data-driven insights faster to inform your company's cash flow decisions. It can change important assumptions such as your key drivers or key indicators. By shifting your finance teams  time from data gathering to data analysis, you'll empower them to enable companywide, data-driven decision making.

Cash Flow Management Matters More Than Ever

Has cash flow management ever mattered more? 

Well, whether the economy is turbulent or stable, whether your focus is on growth or sustainability, whether the capital markets are shrinking or thriving the value of effective cash flow management is timeless. No business can achieve long-term success without mastering its cash flow management.

Want to level up your cash flow management further? Venas cash flow management software can help your finance team plan for any scenario with driver-based modeling that you can run monthly, weekly or daily.

Managing Cash Flow in Complex Business Conditions

Learn strategies for leveraging technology, mitigating risks and optimizing cash flow for financial stability and long-term success in a dynamic business environment.


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About the Author

Tom Seegmiller, Vice President, FP&A, Vena

As Vice President, FP&A at Vena, Tom Seegmiller is responsible for strategic finance, including business partnering, budgeting and forecasting, with a focus on optimizing enterprise value. Tom is instrumental in the formulation of the financial narrative for the executive leadership team, investors and board members. Tom has always had a focus on driving enhanced business decisions through leveraging financial and operational data. He is an experienced finance executive, having most recently led the finance team at Miovision Technologies. Prior to that, he was in senior FP&A leadership roles at OpenText. Tom enjoys golfing, skiing, exercising and traveling in his spare time, but most importantly, he loves spending time with his wife and daughter.

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