What Does a CFO Do? Pt. 2, Cash Management

In this series of blog posts, we’re going to go into depth on the major areas of responsibility for a CFO.  As previously stated, a good CFO will have reach and responsibility in many areas of a company, and it’s tough to answer the “What does a CFO do?” question in just a few sentences.  Today we’re going to talk about cash management.

In today’s business and economic environment, cash management is certainly one of the most important duties of a CFO.  From cash forecasting to treasury, not a day should go by that your CFO isn’t working on some sort of cash issue.  From day one, proactive planning should be the goal.  This is achieved primarily through forecasts and dashboards.

Forecasting cash requirements and anticipated cash flow on a weekly, monthly, and yearly basis will give your business the tools to make better business decisions and head off problems before they arise.  This requires a team effort between the managers of your business working with the CFO, to forecast and plan for future billings, collections, payables, costs and expenses.  Having this detailed cash roadmap will allow you to manage debt effectively, plan for the use of excess cash, and as already stated, head off problems before they arise.

Establishing these projections, along with cash dashboards, gives you the tools to be in control of your business.  Being in control means keeping your line of credit at optimal levels, understanding the necessary goals of your accounting department, and planning proactively for the uses of cash.

By having a strong cash management system,  you can manage your bank line of credit or other debt to minimize interest payments.  This will improve the future cash position and also improve your P&L.  By deeply understanding your projected cash position, you can also invest conservatively in short-term liquid assets, thereby increasing your future cash position even more.

But the largest benefit is without a doubt the ability to insure that cash is available to meet short-term working capital needs.  These needs include payroll, utilities, rent, payables and a slew of other SG&A expenses.  Not understanding your working capital requirements, and how your collection cycle could impact your ability to meet them, can cause serious pain.  By charting out your future cash inflows and outflows, you can spot trouble areas before they become problems.

If you are not planning your cash flow, then do you really know what waits around the corner?  What if you take on a new customer?  How will that impact your cash position and your ability to serve your existing customers?  Without a good cash management system, it is difficult to truly understand.  A good CFO will implement such systems immediately.

About Gateway CFO Solutions, LLC:

Based in St. Louis, Gateway CFO Solutions helps small businesses grow profits and revenues, and bring peace of mind to their company’s financial picture through part-time CFO services.  Many small business owners are without a trusted advisor for the financial side of their business, and they have seemingly few resources to turn to for expert guidance.  We provide that guidance and act as a trusted, strategic advisor for our clients.  We provide both broad, global planning and “roll up the sleeves” technical services.

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