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C2FO Powers Early Payment Programs for the World’s Largest Companies.
Discover expert insights on working capital, cash flow optimization, supply chain management and more.
We believe all businesses can and should have equitable access to low-cost, convenient capital to grow and thrive.
Optimizing your business’s cash management should be a first-line strategy when financing becomes expensive and difficult to access.
According to a 2023 survey from Goldman Sachs, 29% of small business owners are unable to afford a loan, while 85% anticipate a hit to their growth if the credit crunch worsens.
Rising borrowing costs and stricter lending standards are prompting many businesses to rethink their cash management strategies. According to Federal Reserve officials, it could be several years before interest rates return to pre-pandemic levels, if ever. Factor in other political, environmental and economic uncertainties, as well as recession fears, and finding debt-free ways to optimize your working capital becomes an inevitable reality for the foreseeable future.
Unlocking cash within your working capital cycle is possible, but it takes a concerted effort across the organization, from your financial reporting function to supply chain management. As a CFO, accounting manager or treasurer, here are some key ways to manage and optimize cash flow so your business can stay resilient and grow in the face of economic uncertainty.
The first step in taking control of your organization’s cash is to implement a cash-focused culture across the entire organization. This often means educating employees about the importance of cash management and implementing best practices, especially within your accounting team. Some examples of best practices include:
Reporting and forecasting your finances regularly is crucial to effective cash management. This process will help you make more informed cash management decisions and avoid cash shortages. Consider building a forecast that spans the next one to three years, updating it whenever new financial information is available. It’s important to adjust your forecast regularly and refine the process, developing a reliable resource that leadership can rely on to make a sound financial plan.
Make sure to factor in variables such as how you receive income, the length of your buyer payment terms, how you receive financing and if your industry is vulnerable to particular market events. While every business’s reporting and forecasting process will look different, some key metrics to give you more visibility into your cash management include:
While invoicing, reporting and forecasting can be done manually, businesses that aim to optimize their resources should invest in more advanced software. AI-powered solutions can automate financial reporting and forecasting, based on both your internal cash flow data as well as external market factors. This is especially helpful during times of economic volatility when forecasts become quickly outdated.
Automating your invoicing process can also expedite the billing cycle, prompting faster payments and increasing cash flow. Automation also reduces the potential for human error, preventing poor financial decisions that could end up costing your business down the road.
Similar cost savings can be achieved by applying automation technology to inventory management. For example, AI can automatically review your current inventory lineup for unprofitable products or alert your team when required inventory is expected to rise in price.
Does your business approach its supplier relationships strategically? If not, segmenting suppliers by their level of importance and leverage can uncover opportunities for greater efficiency and cost savings within your supply chain.
For example, imagine that your business relies heavily on a plastic manufacturer to create your products. This type of supplier has a large impact on your margins. However, similar suppliers are abundant in the market, so you may discover a lucrative opportunity to diversify your options and access more competitive pricing.
On the other hand, high-risk suppliers — those that are valuable to your business and have few alternatives — may present cash management opportunities in other ways. Over time, nurturing these supplier partnerships can have significant financial payoffs for your business, because they:
One of the most fruitful ways to optimize your company’s financial resources is to unlock cash that’s trapped in accounts receivable. Many businesses are forced to rely on credit simply because they must wait 60, 90 or more days for buyers to pay outstanding invoices.
While best practices, such as sending invoices promptly, can encourage faster payments, sometimes these strategies aren’t enough to fuel your cash flow. In this case, incentivizing buyers with discounts is often an affordable way to access cash when high interest rates and strict credit terms make traditional financing out of reach.
Innovative fintech companies are putting a new spin on the concept of invoice discounting through buyer-initiated early payment programs. If any of your buyers have implemented a program such as C2FO’s Early Pay solution, you can request early payments from them at any time using a discount rate of your choosing. If your buyer accepts the discount offer, you can get paid in as little as 24 hours with no additional fees aside from the discount itself.
According to a 2023 PwC survey, cash and liquidity management is considered the top priority for treasurers globally. However, outdated processes and limited financial insights can often prevent leadership from managing cash strategically — a function that is critical in high-rate environments.
Thankfully, your business most likely holds several opportunities for optimizing its cash, from implementing accounting automation to rethinking your supplier relationships. If you’re looking for a quick win, early payment programs offer an accessible, risk-free and efficient way to unlock cash from your accounts receivable — and the best part is, you can get started today.
Need to boost cash flow? Find out if any of your buyers support C2FO’s Early Pay solution and start requesting early payments.
In this article:
Free cash flow can indicate your business’s financial health and help you track progress. But what is free cash flow exactly? And why is it so important?
Even if your business is struggling to secure financing in today’s economic climate, there are other effective ways to improve liquidity and grow.
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